-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PVbriDHjPO5hSH9lV57hZX6t/TzStHvZdqDtL7P812ZBf8JzpVad3KZ88qEzDyl5 ZrUvf1pcCK0mfo5R2XqecQ== /in/edgar/work/0000086312-00-000025/0000086312-00-000025.txt : 20001115 0000086312-00-000025.hdr.sgml : 20001115 ACCESSION NUMBER: 0000086312-00-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ST PAUL COMPANIES INC /MN/ CENTRAL INDEX KEY: 0000086312 STANDARD INDUSTRIAL CLASSIFICATION: [6331 ] IRS NUMBER: 410518860 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10898 FILM NUMBER: 764221 BUSINESS ADDRESS: STREET 1: 385 WASHINGTON ST CITY: SAINT PAUL STATE: MN ZIP: 55102 BUSINESS PHONE: 6123107911 FORMER COMPANY: FORMER CONFORMED NAME: ST PAUL COMPANIES INC /MN/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SAINT PAUL COMPANIES INC DATE OF NAME CHANGE: 19900730 10-Q 1 0001.txt 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF --- THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 ------------------ or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) --- OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------- ---------- Commission File Number 0-3021 ------ THE ST. PAUL COMPANIES, INC. ---------------------------------------------------- (Exact name of Registrant as specified in its charter) Minnesota 41-0518860 ------------------------------ ------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) No.) 385 Washington St., Saint Paul, MN 55102 ---------------------------------- -------- (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code: (651) 310-7911 ------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares of the Registrant's Common Stock, without par value, outstanding at November 9, 2000, was 217,689,317. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES TABLE OF CONTENTS Page No. PART I. FINANCIAL INFORMATION -------- Consolidated Statements of Operations (Unaudited), Three Months and Nine Months Ended September 30, 2000 and 1999 3 Consolidated Balance Sheets, September 30, 2000 (Unaudited) and December 31, 1999 4 Consolidated Statements of Shareholders' Equity, Nine Months Ended September 30, 2000 (Unaudited) and Twelve Months Ended December 31, 1999 6 Consolidated Statements of Comprehensive Income (Unaudited), Nine Months Ended September 30, 2000 and 1999 7 Consolidated Statements of Cash Flows (Unaudited), Nine Months Ended September 30, 2000 and 1999 8 Notes to Consolidated Financial Statements (Unaudited) 9 Management's Discussion and Analysis of Financial Condition and Results of Operations 22 PART II. OTHER INFORMATION Item 1 through Item 6 40 Signatures 40 EXHIBIT INDEX 41 PART I FINANCIAL INFORMATION THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Consolidated Statements of Operations (Unaudited) Three Months Ended Nine Months Ended (In millions, September 30 September 30 except per share data) ------------------ ----------------- 2000 1999 2000 1999 Revenues: ----- ----- ----- ----- Premiums earned $1,402 $1,247 $4,287 $3,948 Net investment income 407 387 1,215 1,176 Asset management 88 85 265 251 Realized investment gains 101 41 526 173 Other 33 25 95 79 ------ ------ ------ ------ Total revenues 2,031 1,785 6,388 5,627 ------ ------ ------ ------ Expenses: Insurance losses and loss adjustment expenses 813 850 2,867 2,820 Life policy benefits 121 101 314 253 Policy acquisition expenses 353 337 1,040 1,023 Operating and administrative 413 325 997 810 ------ ------ ------ ------ Total expenses 1,700 1,613 5,218 4,906 ------ ------ ------ ------ Income from continuing operations before income taxes and cumulative effect of accounting change 331 172 1,170 721 Income tax expense 101 35 359 168 ------ ------ ------ ------ Income from continuing operations before cumulative effect of accounting change 230 137 811 553 Cumulative effect of accounting change, net of taxes - - - (30) ------ ------ ------ ------ Income from continuing operations 230 137 811 523 Gain (loss) from discontinued operations, net of taxes 1 190 (11) 173 ------ ------ ------ ------ Net income $231 $327 $800 $696 ====== ====== ====== ====== Basic earnings per common share: Income from continuing operations before cumulative effect of accounting change $1.04 $0.59 $3.69 $2.39 Cumulative effect of accounting change, net of taxes - - - (0.13) ------ ------ ------ ------ Income from continuing operations $1.04 $0.59 $3.69 $2.26 Gain (loss) from discontinued operations, net of taxes - 0.84 (0.06) 0.75 ------ ------ ------ ------ Net income $1.04 $1.43 $3.63 $3.01 ====== ====== ====== ====== Diluted earnings per common share: Income from continuing operations before cumulative effect of accounting change $0.98 $0.56 $3.47 $2.26 Cumulative effect of accounting change, net of taxes - - - (0.12) ------ ------ ------ ------ Income from continuing operations $0.98 $0.56 $3.47 $2.14 Gain (loss) from discontinued operations, net of taxes - 0.78 (0.05) 0.70 ------ ------ ------ ------ Net income $0.98 $1.34 $3.42 $2.84 ====== ====== ====== ====== Dividends declared on common stock $0.27 $0.26 $0.81 $0.78 ====== ====== ====== ====== See notes to consolidated financial statements. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In millions) September 30, December 31, ASSETS 2000 1999 - ------ ------------ ------------ (Unaudited) Investments: Fixed maturities, at estimated fair value $20,198 $19,080 Equities, at estimated fair value 1,634 1,617 Real estate and mortgage loans 1,307 1,504 Venture capital, at estimated fair value 1,101 867 Securities lending collateral 1,484 1,216 Other investments 319 298 Short-term investments, at cost 1,141 1,347 -------- -------- Total investments 27,184 25,929 Cash 81 158 Asset management securities held for sale 29 45 Reinsurance recoverables: Unpaid losses 5,317 4,331 Paid losses 316 191 Ceded unearned premiums 732 639 Receivables: Underwriting premiums 2,896 2,292 Interest and dividends 366 356 Other 344 223 Deferred policy acquisition expenses 1,085 942 Deferred income taxes 1,178 1,262 Office properties and equipment, at cost less accumulated depreciation of $450 (1999; $431) 515 499 Goodwill 510 399 Other assets 1,104 1,290 -------- -------- Total assets $41,657 $38,556 ======== ======== See notes to consolidated financial statements. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (continued) (In millions) September 30, December 31, LIABILITIES AND SHAREHOLDERS' EQUITY 2000 1999 - ------------------------------------ ------------ ----------- (Unaudited) Liabilities: Insurance reserves: Losses and loss adjustment expenses $18,647 $17,720 Future policy benefits 5,236 4,885 Unearned premiums 3,567 3,048 -------- -------- Total insurance reserves 27,450 25,653 Debt 1,636 1,466 Payables: Reinsurance premiums 1,052 654 Income taxes 399 311 Accrued expenses and other 1,093 1,138 Securities lending 1,484 1,216 Other liabilities 1,159 1,221 -------- -------- Total liabilities 34,273 31,659 -------- -------- Company-obligated mandatorily redeemable preferred capital securities of subsidiaries or trusts holding solely subordinated debentures of the Company 337 425 -------- -------- Shareholders' equity: Preferred: SOP convertible preferred stock; 1.45 shares authorized; 0.8 shares outstanding (0.9 shares in 1999) 118 129 Guaranteed obligation - SOP (68) (105) -------- -------- Total preferred shareholders' equity 50 24 -------- -------- Common: Common stock, 480 shares authorized; 218 shares outstanding (225 shares in 1999) 2,211 2,079 Retained earnings 4,119 3,827 Accumulated other comprehensive income: Unrealized appreciation 735 568 Unrealized loss on foreign currency translation (68) (26) -------- -------- Total accumulated other comprehensive income 667 542 -------- -------- Total common shareholders' equity 6,997 6,448 -------- -------- Total shareholders' equity 7,047 6,472 -------- -------- Total liabilities, redeemable preferred securities and shareholders' equity $41,657 $38,556 ======== ======== See notes to consolidated financial statements. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Consolidated Statements of Shareholders' Equity (In millions) Nine Twelve Months Ended Months Ended September 30 December 31 ------------ ----------- 2000 1999 ---------- ---------- (Unaudited) Preferred shareholders' equity: Series B SOP convertible preferred stock: Beginning of period $129 $134 Redemptions during period (11) (5) -------- -------- End of period 118 129 -------- -------- Guaranteed obligation - SOP: Beginning of period (105) (119) Principal payments 37 14 -------- -------- End of period (68) (105) -------- -------- Total preferred shareholders' equity 50 24 -------- -------- Common shareholders' equity: Common stock: Beginning of period 2,079 2,128 Stock issued under stock incentive plans 69 37 Stock issued for preferred shares redeemed 20 9 Reacquired common shares (164) (102) Conversion of monthly income preferred securities 207 - Other - 7 -------- -------- End of period 2,211 2,079 -------- -------- Retained earnings: Beginning of period 3,827 3,480 Net income 800 834 Dividends declared on common stock (173) (235) Dividends declared on preferred stock, net of taxes (6) (8) Reacquired common shares (348) (254) Tax benefit on employee options, and other changes 28 14 Premium on preferred shares redeemed (9) (4) -------- -------- End of period 4,119 3,827 -------- -------- Unrealized appreciation, net of taxes: Beginning of period 568 1,027 Change during the period 167 (459) -------- -------- End of period 735 568 -------- -------- Unrealized gain (loss)loss on foreign currency translation, net of taxes: Beginning of period (26) (14) Change during the period (42) (12) -------- -------- End of period (68) (26) -------- -------- Total common shareholders' equity 6,997 6,448 -------- -------- Total shareholders' equity $7,047 $6,472 ======== ======== See notes to consolidated financial statements. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income Unaudited (In millions) Three Months Ended Nine Months Ended September 30 September 30 ------------------ ----------------- 2000 1999 2000 1999 ------ ------ ------ ------ Net income $231 $327 $800 $696 ------ ------ ------ ------ Other comprehensive income (loss), net of taxes: Change in unrealized appreciation 70 (143) 167 (500) Change in unrealized loss on foreign currency translation (21) (5) (42) (10) ------ ------ ------ ------ Other comprehensive income (loss) 49 (148) 125 (510) ------ ------ ------ ------ Comprehensive income $280 $179 $925 $186 ====== ====== ====== ====== See notes to consolidated financial statements. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Unaudited (In millions) Nine Months Ended September 30 ------------------ 2000 1999 ---- ---- OPERATING ACTIVITIES Net income $800 $696 Adjustments: Loss (gain) from discontinued operations 11 (173) Change in property-liability insurance reserves 331 106 Change in reinsurance balances (872) (456) Change in premiums receivable (418) (256) Provision for federal deferred income tax expense 166 107 Change in accounts payable and accrued expenses (96) 170 Change in asset management balances (1) (2) Depreciation and amortization 79 94 Realized investment gains (526) (173) Cumulative effect of accounting change - 30 Other 72 (6) ------ ------ Net Cash Provided (Used) by Continuing Operations (454) 137 Net Cash Provided (Used) by Discontinued Operations (8) 24 ------ ------ Net Cash Provided (Used) by Operating Activities (462) 161 ------ ------ INVESTING ACTIVITIES Purchase of investments (4,922) (4,547) Proceeds from sales and maturities of investments 5,354 4,320 Net sales (purchases) of short-term investments 285 (354) Change in open security transactions (35) 61 Purchases of office properties and equipment (84) (100) Sales of office properties and equipment 8 5 Acquisitions, net of cash acquired (202) - Proceeds from sale of subsidiaries 201 252 Other (63) 49 ------ ------ Net Cash Provided (Used) by Continuing Operations 542 (314) Net Cash Provided (Used) by Discontinued Operations 44 (48) ------ ------ Net Cash Provided (Used) by Investing Activities 586 (362) ------ ------ FINANCING ACTIVITIES Deposits on universal life and investment contracts 747 727 Withdrawals on universal life and investment contracts (433) (96) Dividends paid on common and preferred stock (180) (184) Proceeds from issuance of debt 498 110 Repayment of debt (372) (81) Repurchase of common shares (512) (265) Stock options exercised and other 51 15 ------ ------ Net Cash Provided (Used) by Financing Activities (201) 226 ------ ------ Increase (decrease) in cash (77) 25 Cash at beginning of period 158 146 ------ ------ Cash at end of period $ 81 $171 ====== ====== See notes to consolidated financial statements. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Unaudited September 30, 2000 Note 1 - Basis of Presentation - ------------------------------ The financial statements include The St. Paul Companies, Inc. and subsidiaries (The St. Paul or the company), and have been prepared in conformity with generally accepted accounting principles. These consolidated financial statements rely, in part, on estimates. In the opinion of management, all necessary adjustments, consisting of normal recurring adjustments, have been reflected for a fair presentation of the results of operations, financial position and cash flows in the accompanying unaudited consolidated financial statements. The results for the period are not necessarily indicative of the results to be expected for the entire year. Reference should be made to the "Notes to Consolidated Financial Statements" in The St. Paul's annual report to shareholders for the year ended December 31, 1999. The amounts in those notes have not changed materially except as a result of transactions in the ordinary course of business or as otherwise disclosed in these notes. Some amounts in the 1999 consolidated financial statements have been reclassified to conform with the 2000 presentation. These reclassifications had no effect on net income, comprehensive income or shareholders' equity, as previously reported. Supplemental Cash Flow Information - ---------------------------------- Noncash Financing Activity - In August 2000, we issued 7,006,954 common shares in the conversion of over 99 percent of the St. Paul Capital L.L.C.'s (our wholly-owned subsidiary) $207 million of 6% Convertible Monthly Income Preferred Securities. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Note 2 - Acquisitions - --------------------- In February 2000, we closed on our purchase of Pacific Select Insurance Holdings, Inc., and its wholly-owned subsidiary Pacific Select Property Insurance Co. (together, Pacific Select), a California insurer that sells earthquake coverage to California homeowners. The transaction was accounted for as a purchase, at a cost of approximately $37 million. Pacific Select's results of operations from the date of purchase are included in our consolidated results for the nine months ended Sept. 30, 2000. In April 2000, we closed on our acquisition of MMI Companies, Inc. (MMI), a Deerfield, Illinois-based provider of medical services-related insurance products and consulting services. The transaction was accounted for as a purchase, with a total purchase price of approximately $206 million, in addition to the assumption of $165 million in capital securities and debt. The purchase price resulted in goodwill of approximately $101 million, which we expect to amortize on a straight-line basis over 15 years. MMI's results of operations from the date of purchase are included in our consolidated results for the nine months ended Sept. 30, 2000. Related to the MMI purchase, we established a reserve of $28 million, including $4 million in employee-related costs and $24 million in occupancy-related costs. The employee-related costs represent severance and related benefits such as outplacement counseling to be paid to, or incurred on behalf of, terminated employees. We estimated that approximately 130 employee positions would be eliminated, at all levels throughout MMI. Through Sept. 30, 2000, 94 employees had been terminated, with payments totaling $3 million. The occupancy-related cost represents excess space created by the terminations, calculated by determining the percentage of anticipated excess space, by location, and the current lease costs over the remaining lease period. The amounts payable under the existing leases were not discounted, and sublease income was included in the calculation only for those locations where sublease agreements were in place. No payments have been made related to the occupancy-related reserve. The following table presents the pro forma results of our operations for the nine months ended Sept. 30, 2000 and 1999, as though we had purchased MMI at the beginning of each of the periods presented. The pro forma data is provided for illustrative purposes only, and does not purport to be indicative of the results that would have actually occurred if the purchase of MMI had been consummated at the beginning of the periods presented, or that may be obtained in the future. (In millions) ----------- 2000 1999 -------- ------- Total revenues $6,492 5,991 Net income 680 634 Fully diluted earnings per share $2.90 2.59 As disclosed in our March 31, 2000 Form 10-Q, MMI's first quarter 2000 results included reserve strengthening of $93 million, with $77 million reflected in their domestic operations and $16 million reflected in their international operations. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Note 3 - Discontinued Operations - -------------------------------- Standard Personal Insurance Business - ------------------------------------ On Sept. 30, 1999, we completed the sale of our standard personal insurance operations to Metropolitan Property and Casualty Insurance Company (Metropolitan). As a result, the standard personal insurance operations have been accounted for as discontinued operations for all periods presented herein. During the third quarter of 1999, we recognized a pretax gain on proceeds of $138 million and a $136 million pretax gain on discontinued operations. The third quarter 1999 discontinued operations included a reserve reduction of $145 million. Metropolitan purchased Economy Fire & Casualty Company and its subsidiaries (Economy), as well as the rights and interests in those non-Economy policies constituting our remaining standard personal insurance operations. Those rights and interests were transferred to Metropolitan by way of a reinsurance and facility agreement (Reinsurance Agreement). The Reinsurance Agreement relates solely to the non-Economy standard personal insurance policies, and was entered into solely as a means of accommodating Metropolitan through a transition period. The Reinsurance Agreement allows Metropolitan to write non-Economy business on our policy forms while Metropolitan obtains the regulatory license, form and rate approvals necessary to write non-Economy business through their own insurance subsidiaries. Any business written on our policy forms during this transition period is then fully ceded to Metropolitan under the Reinsurance Agreement. We recognized no gain or loss on the inception of the Reinsurance Agreement and will not incur any net revenues or expenses related to the Reinsurance Agreement. All economic risk of post-sale activities related to the Reinsurance Agreement has been transferred to Metropolitan. We anticipate that Metropolitan will pay all claims incurred related to this Reinsurance Agreement. In the event Metropolitan is unable to honor their obligations to us, we will pay these amounts. As part of the sale to Metropolitan, we guaranteed the adequacy of Economy's loss and loss expense reserves. Under that guarantee, we will pay for any deficiencies in those reserves and will share in any redundancies that develop by Sept. 30, 2002. We remain liable for claims on non-Economy policies that result from losses occurring prior to closing. By agreement, Metropolitan will adjust those claims and share in redundancies in related reserves that may develop. Any losses incurred by us under these agreements will be reflected in discontinued operations in the period they are incurred. For the first nine months of 2000, we recorded a pretax loss of $5 million in discontinued operations. We have no other contingent liabilities related to the sale. Nonstandard Auto Business - ------------------------- On Jan. 4, 2000, we announced an agreement to sell our nonstandard auto business to The Prudential Insurance Company of America (Prudential) for $200 million in cash. As a result, the nonstandard auto business results of operations have been accounted for as discontinued operations for all periods presented. On May 1, 2000, we closed on the sale of our nonstandard auto business to Prudential, receiving total cash consideration of approximately $175 million (net of a $25 million dividend paid to our property-liability operations prior to closing). In the fourth quarter of 1999, we had recorded an estimated after-tax loss on disposal of $83 million for our nonstandard auto operations. We recorded an additional after-tax loss of $7 million through closing. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Note 4 - Earnings Per Share - --------------------------- Earnings per common share (EPS) amounts were calculated by dividing net income, as adjusted, by the average common shares outstanding. Three Months Ended Nine Months Ended September 30 September 30 ------------------ ----------------- 2000 1999 2000 1999 ------ ------ ------ ------ (In millions except per share data) EARNINGS Basic: Net income, as reported $231 $327 $800 $696 Dividends on preferred stock, net of taxes (2) (2) (6) (6) Premium on preferred shares redeemed (3) (1) (9) (3) ------ ------ ------ ------ Net income available to common shareholders $226 $324 $785 $687 ====== ====== ====== ====== Diluted: Net income available to common shareholders $226 $324 $785 $687 Effect of dilutive securities: Convertible preferred stock 2 2 5 5 Convertible monthly income preferred securities 1 2 5 6 Zero coupon convertible notes 1 1 2 2 ------ ------ ------ ------ Net income available to common shareholders $230 $329 $797 $700 ====== ====== ====== ====== COMMON SHARES Basic: Weighted average common shares outstanding 217 227 216 228 ====== ====== ====== ====== Diluted: Weighted average common shares outstanding 217 227 216 228 Effect of dilutive securities: Stock options 4 2 2 2 Convertible preferred stock 6 7 7 7 Convertible monthly income preferred securites 3 7 6 7 Zero coupon convertible notes 2 2 2 2 ------ ------ ------ ------ Total 232 245 233 246 ====== ====== ====== ====== EARNINGS PER SHARE Basic $1.04 $1.43 $3.63 $3.01 ====== ====== ====== ====== Diluted $0.98 $1.34 $3.42 $2.84 ====== ====== ====== ====== THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Note 5 - Investments - -------------------- Investment Activity. A summary of investment transactions is presented below. Nine Months Ended September 30 ------------------------------ 2000 1999 -------- -------- (In millions) Purchases: Fixed maturities $2,813 $3,149 Equities 1,663 1,063 Real estate and mortgage loans 12 123 Venture capital 372 170 Other investments 62 42 -------- ------- Total purchases 4,922 4,547 -------- ------- Proceeds from sales and maturities: Fixed maturities 2,796 2,920 Equities 1,666 1,085 Real estate and mortgage loans 228 93 Venture capital 613 156 Other investments 51 66 -------- -------- Total sales and maturities 5,354 4,320 -------- -------- Net purchases (sales) $(432) $ 227 ======== ======== Change in Unrealized Appreciation. The increase (decrease) in unrealized appreciation of investments recorded in common shareholders' equity was as follows: Nine Months Ended Twelve Months Ended September 30, 2000 December 31, 1999 ------------------ ------------------- (In millions) Fixed maturities $ 186 $(1,336) Equities (71) 223 Venture capital 142 255 Life deferred policy acquisition costs and policy benefits (1) 122 Single premium immediate annuity reserves - 44 Other (2) (13) ------ ------ Total change in pretax unrealized appreciation 254 (705) Change in deferred taxes (87) 246 ------ ------ Total change in unrealized appreciation, net of taxes $ 167 $(459) ====== ====== THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Note 6 - Income Taxes - --------------------- The components of income tax expense on income from continuing operations, before the cumulative effect of accounting change, were as follows : Three Months Ended Nine Months Ended September 30 September 30 ------------------ ----------------- 2000 1999 2000 1999 ------ ------ ------ ------ (In millions) Federal current tax expense $ 48 $24 $ 179 $ 35 Federal deferred tax expense 48 2 166 107 ------ ------ ------ ------ Total federal income tax expense 96 26 345 142 Foreign income tax expense - 7 1 20 State income tax expense 5 2 13 6 ------ ------ ------ ------ Total income tax expense on continuing operations $101 $35 $359 $168 ====== ====== ====== ====== In connection with our purchase of MMI, we established a $30 million valuation allowance for deferred tax assets related to MMI's non - U.S. operations. This allowance did not impact our consolidated results of operations. Note 7 - Contingent Liabilities - ------------------------------- In the ordinary course of conducting business, we and some of our subsidiaries have been named as defendants in various lawsuits. Some of these lawsuits attempt to establish liability under insurance contracts issued by our underwriting operations. Plaintiffs in these lawsuits are asking for money damages or to have the court direct the activities of the operations in certain ways. Although it is possible that the settlement of a contingency may be material to our results of operations and liquidity in the period in which the settlement occurs, we believe that the total amounts that we or our subsidiaries will ultimately have to pay in all of these lawsuits will have no material effect on our overall financial position. In some cases, plaintiffs seek to establish coverage for their liability under environmental protection laws. See "Environmental and Asbestos Claims" in Management's Discussion and Analysis for information on these claims. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Note 8 - Debt - ------------- Debt consists of the following: September 30, December 31, 2000 1999 ------------- ------------ Book Fair Book Fair Value Value Value Value ----- ----- ----- ----- (In millions) Medium-term notes $617 $601 $617 $598 7-7/8% senior notes 249 257 - - 8-1/8% senior notes 249 257 - - 8-3/8% senior notes 150 151 150 153 Commercial paper 115 115 400 400 Zero coupon convertible notes 97 94 94 93 7-1/8% senior notes 80 79 80 78 Variable rate borrowing 64 64 64 64 Real estate mortgages 15 15 15 15 Floating rate notes - - 46 46 ------ ------ ------ ------ Total debt $1,636 1,633 $1,466 $1,447 ====== ====== ====== ====== On April 17, 2000, we issued $250 million of 7.875% senior notes due April 15, 2005 and $250 million of 8.125% senior notes due April 15, 2010. Proceeds were used to repay commercial paper debt and for general corporate purposes. Note 9 - Segment Information - ---------------------------- We have seven reportable business segments in our property- liability insurance operation, consisting of the Commercial Lines Group, Global Surety, Global Healthcare, Other Global Specialty, International, Reinsurance and Investment Operations. We also have a life insurance segment (primarily Fidelity and Guaranty Life Insurance Company) and an asset management segment (The John Nuveen Company). We evaluate the performance of our property- liability underwriting segments based on GAAP underwriting results. The property-liability investment operation is disclosed as a separate reportable segment because that operation is managed at the corporate level and the invested assets, net investment income and realized gains are not allocated to individual underwriting segments. The life insurance and asset management segments are evaluated based on their respective pretax operating results, which include investment income. The reportable underwriting business segments in our property- liability operation are reported separately because they offer insurance products to unique customer classes and utilize different underwriting criteria and marketing strategies. For example, the Commercial Lines Group provides "commodity-type" insurance products to the small and medium-sized commercial markets. By contrast, each of our Global Specialty segments (Surety, Healthcare and Other Specialty) market specialized insurance products and services tailored to meet the individual needs of specific customer groups, such as doctors, lawyers, officers and directors, as well as technology firms and government entities. Customers in the Global Specialty segments generally require specialized underwriting expertise and claim settlement services. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The tabular information on the following pages provides revenue and income data for each of our business segments for the three months and nine months ended Sept. 30, 2000 and 1999. In the first quarter of 2000, we implemented a new segment reporting structure for our property-liability insurance business following the fourth-quarter realignment of our primary insurance underwriting operations into a Global Specialty Practices organization. As part of that realignment, a portion of our non- U.S. primary insurance business is now included in the respective business segment to which it pertains, which differs from our prior practice of including all non-U.S. business in the International segment. Our Global Specialty segments are managed on a global basis. Under our new segment structure, our International segment includes our operations at Lloyd's and specialty insurance business that we do not manage on a global basis, including Unionamerica, MMI's international business. Also, our Global Healthcare underwriting operation is now reported as a separate business segment, which differs from its prior classification as a component of the Specialty Commercial segment. This change reflects the increasing size of this business, including MMI's U.S. business, relative to our total underwriting operation. Finally, we reclassified our Construction business center, previously included in the Commercial Lines Group segment, to our Other Global Specialty segment, to reflect the more specialized nature of this business. Segment information for 1999 has been restated to be consistent with the 2000 presentation. Three Months Ended Nine Months Ended September 30 September 30 ------------------ ----------------- 2000 1999 2000 1999 ------ ------ ------ ------ (In millions) Revenues from Continuing Operations Property-liability insurance: Primary Insurance Operations: Commercial Lines Group $394 $325 $1,173 $1,164 Global Surety 96 101 316 291 Global Healthcare 139 148 451 478 Other Global Specialty 322 351 1,012 1,009 International 85 47 303 182 ------ ------ ------ ------ Total primary insurance operations 1,036 972 3,255 3,124 Reinsurance 289 213 847 697 ------ ------ ------ ------ Total property-liability premiums earned 1,325 1,185 4,102 3,821 ------ ------ ------ ------ Investment operations: Net investment income 312 317 943 951 Realized investment gains 104 38 542 170 ------ ------ ------ ------ Total investment operations 416 355 1,485 1,121 Other 25 12 66 58 ------ ------ ------ ------ Total property- liability insurance 1,766 1,552 5,653 5,000 ------ ------ ------ ------ Life insurance 162 131 422 340 ------ ------ ------ ------ Asset management 92 87 280 256 ------ ------ ------ ------ Total reportable segments 2,020 1,770 6,355 5,596 Parent company, other operations and consolidating eliminations 11 15 33 31 ------ ------ ------ ------ Total revenues $2,031 $1,785 $6,388 $5,627 ====== ====== ====== ====== THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Note 9 - Segment Information (continued) - --------------------------------------- Three Months Ended Nine Months Ended September 30 September 30 ------------------ ------------------ 2000 1999 2000 1999 ------ ------ ------ ------ (In millions) Income (Loss) from Continuing Operations Before Income Taxes and Cumulative Effect of Accounting Change Property-liability insurance: Primary Insurance Operations: Commercial Lines Group $15 $(38) $48 $(179) Global Surety (2) 6 29 33 Global Healthcare (70) (17) (135) (64) Other Global Specialty 6 (83) (22) (143) International - 3 (60) (17) ------ ------ ------ ------ Total primary insurance (51) (129) (140) (370) Reinsurance 4 15 (74) 44 ------ ------ ------ ------ Total GAAP underwriting result (47) (114) (214) (326) ------ ------ ------ ------ Investment operations: Net investment income 312 317 943 951 Realized investment gains 104 38 542 170 ------ ------ ------ ------ Total investment operations 416 355 1,485 1,121 Other (24) (77) (88) (94) ------ ------ ------ ------ Total property- liability insurance 345 164 1,183 701 ------ ------ ------ ------ Life insurance 15 20 32 48 ------ ------ ------ ------ Asset management: Pretax income before minority interest 43 39 130 116 Minority interest (10) (9) (30) (27) ------ ------ ------ ------ Total asset management 33 30 100 89 ------ ------ ------ ------ Total reportable segments 393 214 1,315 838 Parent company,other operations and consolidating eliminations (62) (42) (145) (117) ------ ------ ------ ------ Total income before income taxes and cumulative effect of accounting change $331 $172 $1,170 $721 ====== ====== ====== ====== THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Note 10 - Reinsurance - --------------------- Our consolidated financial statements reflect the effects of assumed and ceded reinsurance transactions. Assumed reinsurance refers to our acceptance of certain insurance risks that other insurance companies have underwritten. Ceded reinsurance involves transferring certain insurance risks we have underwritten to other insurance companies who agree to share these risks. The primary purpose of ceded reinsurance is to protect us from potential losses in excess of the amount we are willing to accept. We expect those to whom we have ceded reinsurance to honor their obligations. In the event these companies are unable to honor their obligations, we will pay these amounts. We have established allowances for possible nonpayment of reinsurance recoverable amounts due to us. Our 2000 income from continuing operations benefited from cessions made under our corporate all-lines, excess-of-loss reinsurance program (the "corporate program"), and cessions made under a separate excess-of-loss treaty exclusive to our Reinsurance segment. Under the corporate program, during the third quarter of 2000, we ceded written premiums of $183 million, earned premiums of $193 million and insurance losses and loss adjustment expenses of $338 million, for a net pretax benefit of $145 million. For the nine months ended Sept. 30, 2000, we ceded written and earned premiums of $263 million and insurance losses and loss adjustment expenses of $449 million, resulting in a year- to-date net pretax benefit of $186 million. Under the separate Reinsurance segment treaty, for the nine months ended Sept. 30, 2000, we ceded written and earned premiums of $64 million, and insurance losses and loss adjustment expenses of $128 million, resulting in a net pretax benefit of $64 million. The effect of assumed and ceded reinsurance on premiums written, premiums earned and insurance losses, loss adjustment expenses and life policy benefits are as follows: Three Months Ended Nine Months Ended September 30 September 30 ------------------ ----------------- (In millions) 2000 1999 2000 1999 ----- ----- ----- ----- Written premiums: Direct $1,571 $1,254 $3,981 $3,484 Assumed 451 336 1,567 1,227 Ceded (530) (368) (1,165) (763) ----- ----- ----- ----- Net premiums written 1,492 1,222 4,383 3,948 ===== ===== ===== ===== Earned premiums: Direct 1,297 1,152 3,744 3,449 Assumed 521 364 1,439 1,064 Ceded (493) (331) (1,081) (692) ----- ----- ----- ----- Net premiums earned 1,325 1,185 4,102 3,821 Life 77 62 185 127 ----- ----- ----- ----- Total premiums earned 1,402 1,247 4,287 3,948 ===== ===== ===== ===== Insurance losses and loss adjustment expenses: Direct 1,059 831 2,893 2,710 Assumed 205 289 1,241 779 Ceded (451) (270) (1,267) (669) ----- ----- ----- ----- Net losses and loss adjustment expenses 813 850 2,867 2,820 Life policy benefits 121 101 314 253 ----- ----- ----- ----- Total $ 934 $ 951 $3,181 $3,073 ===== ===== ===== ===== THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Note 11 - Restructuring Charges - ------------------------------- Third Quarter 1999 Charge - In August 1999, we announced a cost reduction program designed to enhance our efficiency and effectiveness in a highly competitive environment. In the third quarter of 1999, we recorded a pretax charge of $60 million related to this program, including $25 million in employee- related charges, $33 million in occupancy-related charges and $2 million in equipment charges. The employee-related charge represents severance and related benefits such as outplacement counseling, vacation buy-out and medical coverage to be paid to terminated employees. The charge relates to the anticipated termination of approximately 700 employees at all levels throughout the Company. Approximately 590 employees were terminated under this action. The occupancy-related charge represents excess space created by the cost reduction action. The charge was calculated by determining the percentage of anticipated excess space, by location, and the current lease costs over the remaining lease period. The amounts payable under the existing leases were not discounted, and sublease income was included in the calculation only for those locations where sublease agreements were in place. The equipment charges represent the elimination of personal computers directly related to the number of employees being severed under this cost reduction action and the elimination of network servers and other equipment resulting from this action. The amount was calculated as the book value of this equipment less estimated sale proceeds. All actions to be taken under this plan were completed in 2000. The following presents a rollforward of activity related to this charge: (In millions) Pre-tax Reserve at Reserves at Charge Dec. 31. 1999 Payments Sept. 30, 2000 -------- ------------- --------- --------------- Charges to earnings: Employee-related $25 $14 $(13) $1 Occupancy-related 33 31 (5) 26 Equipment charges 2 N/A N/A N/A ------ ------ ------ ------ Total $60 $45 $(18) $27 ====== ====== ====== ====== Fourth Quarter 1998 Charge - Late in the fourth quarter of 1998, we recorded a pretax restructuring charge of $34 million. The majority of the charge, $26 million, related to the anticipated termination of approximately 520 employees in the following operations: Claims, Commercial Lines Group, Information Systems, Global Healthcare, and Financial and Professional Services. The remaining charge of $8 million related to costs to be incurred to exit lease obligations. Approximately 500 employees were terminated under the restructuring plan. Termination actions taking place under this plan have been completed. Since substantially all payments have been made to terminated employees, we reduced the employee- related accrual by $2 million. The table below provides a rollforward of activity related to this charge: (in millions) Pre-tax Reserve at Reserves at Charge Dec. 31, 1999 Payments Adjustments Sept. 30, 2000 ------- ------------- -------- ----------- -------------- Charges to earnings: Employee- related $26 $3 $(1) $(2) $- Occupancy- related 8 2 - - 2 ------ ------ ----- ----- ----- Total $34 $5 $(1) $(2) $2 ====== ====== ===== ===== ===== THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Note 11 - Restructuring Charges (continued) - ------------------------------------------ Second Quarter 1998 Charge - Related to our merger with USF&G, we recorded a pretax charge to earnings of $292 million in 1998, primarily consisting of severance and other employee-related costs, facilities exit costs, asset impairments and transaction costs. We estimated that approximately 2,000 positions would be eliminated due to the combination of the two organizations, resulting from efficiencies to be realized by the larger organization and the elimination of redundant functions. All levels of employees, from technical staff to senior management, were affected by the reductions. The original number of positions expected to be reduced by function included approximately 950 in our property-liability underwriting operation, 350 in claims and 700 in finance and other administrative positions, throughout the United States. Approximately 2,200 positions were eliminated, and the cost of termination benefits paid was $137 million. Termination actions taking place under this plan were completed by Dec. 31, 1999, however, payments were still being made to terminated employees during the first six months of 2000. Since certain executives remained with the company and are no longer eligible to receive the amounts accrued, the executive severance accrual was reduced by $2 million. The following table provides a rollforward of activity related to the charge: (In millions) Pre-tax Charges to earnings: Charge ------------------- ------- USF&G corporate headquarters $36 Long-lived assets 23 Acceleration of software depreciation 10 Computer leases and equipment 10 Other equipment and furniture 8 ---- Subtotal 87 ---- Accrued charges subject to rollforward: ---------------- Reserve Reserve Pre- at at tax Dec. 31, Sept. 30, Charge 1999 Payments Adjustments 2000 ------ ------- -------- ----------- -------- Executive severance $89 $3 $(1) $(2) $- Other severance 52 1 (1) - - Branch lease exit costs 34 24 (5) - 19 Transaction costs 30 - - - - ---- --- --- --- --- Accruals subject to rollforward 205 28 (7) (2) 19 ---- --- --- --- --- Total $292 $28 $(7) $(2) $19 ==== === === === === Note 15 in our 1999 Annual Report to Shareholders provides more information regarding the rationale for and calculation of the components of the merger-related charge. Upon consummation of the merger, we determined that several of USF&G's real estate investments were not consistent with our real estate investment strategy. A plan was developed to sell a number of apartment buildings and various other miscellaneous holdings, with an expected disposal date by year-end 1999. In applying the provisions of SFAS No. 121, it was determined that four of these miscellaneous investments should be written down to fair value, based on our plan to sell them. Fair value was determined based on a discounted cash flow analysis, or based on market prices for similar assets. The one remaining investment represents percentage rents retained after sale of a portfolio of stores to a third party. The current balance of this investment is $2.4 million held in the property-liability segment and $0.4 million held in the life segment. This investment is expected to be sold by year-end 2000. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Note 12 - Share Repurchase Authorization - ---------------------------------------- On May 2, 2000, our board of directors authorized a new $300 million share repurchase program. Under the program, we are authorized to repurchase up to an additional $300 million of our common stock in the open market and through private transactions. The new authorization was in addition to the $76 million remaining at that time under a $500 million repurchase plan approved in November 1999. At Sept. 30, 2000, we had approximately $198 million remaining available for repurchase under the May 2000 authorization. Note 13 - Conversion of 6% Convertible Monthly Income Preferred Securities - ---------------------------------------------------------------------------- On July 14, 2000, St. Paul Capital L.L.C. (a wholly-owned subsidiary of the company) provided notice to holders of its $207 million of 6% Convertible Monthly Income Preferred Securities that it was exercising its right to cause the conversion rights of the holders of those securities to expire on Aug. 14, 2000. Over 99 percent of the 4.14 million securities were converted into approximately 7 million shares of the St. Paul's common stock, at a conversion price of $29.50 per security. The remaining securities were redeemed at $50.00 per security plus accumulated and unpaid dividends. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations September 30, 2000 Consolidated Results -------------------- The following table summarizes The St. Paul's results for the third quarter and first nine months of 2000 and 1999. Three Months Nine Months Ended September 30 Ended September 30 ------------------ ------------------ (In millions except per share data) 2000 1999 2000 1999 Pretax income (loss): ------ ------ ------ ------ Property-liability insurance: GAAP underwriting result $(47) $(114) $(214) $(326) Net investment income 312 317 943 951 Realized investment gains 104 38 542 170 Other (24) (77) (88) (94) ----- ----- ----- ----- Total property- liability insurance 345 164 1,183 701 Life insurance 15 20 32 48 Asset management 33 30 100 89 Parent and other (62) (42) (145) (117) ----- ----- ----- ----- Income from continuing operations before income taxes and cumulative effect of accounting change 331 172 1,170 721 Income tax expense 101 35 359 168 ----- ----- ----- ----- Income from continuing operations before cumulative effect of accounting change 230 137 811 553 Cumulative effect of accounting change, net of taxes - - - (30) ----- ----- ----- ----- Income from continuing operations 230 137 811 523 Discontinued operations, net of taxes 1 190 (11) 173 ----- ----- ----- ----- Net income $ 231 $327 $800 $696 ===== ===== ===== ===== Diluted net income per common share $0.98 $1.34 $3.42 $2.84 ===== ===== ===== ===== Consolidated Results - -------------------- Our pretax income from continuing operations of $331 million in the third quarter was 92% higher than comparable pretax income of $172 million in the same 1999 period, driven by an increase in realized investment gains and improved underwriting results in our property-liability operations. Through the first nine months of 2000, pretax income from continuing operations was $449 million higher than in the comparable period of 1999, primarily due to the significant increase in realized investment gains. Our property-liability insurance pretax results for the third quarter and first nine months of both 2000 and 1999 included significant benefits from aggregate excess-of-loss reinsurance treaties, as detailed on page 25 of this report. Nine-month results in 2000 also reflect a $102 million reserve reduction, as discussed on page 26 of this report. Third quarter and nine- month results of discontinued operations in 1999 reflect the gain on sale of our standard personal insurance business, as discussed on page 24 of this report. Our effective tax rate in 2000 was significantly higher than the comparable 1999 rate, primarily due to the substantial increase in realized investment gains, which were taxed at the 35% federal statutory rate. The "cumulative effect of accounting change" of $30 million (net of taxes) in 1999 represented the effect of adopting the AICPA's Statement of Position (SOP) 97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related Assessments." The SOP provides guidance for recognizing and measuring liabilities for guaranty fund and other insurance-related assessments. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Management's Discussion, Continued Consolidated Highlights (continued) ---------------------------------- Elimination of One-Quarter Reporting Lag - ---------------------------------------- In the first quarter of 2000, we eliminated the one-quarter reporting lag for our reinsurance operations based in the United Kingdom ("St. Paul Re - UK"), and now report the results of those operations on a current basis. As a result, our consolidated results for the first nine months of 2000 include St. Paul Re - UK's results for the fourth quarter of 1999 and the first nine months of 2000. The year-to-date incremental impact on our property-liability operations of eliminating the reporting lag, which consists of St. Paul Re - UK's results for the three months ended Sept. 30, 2000, was as follows: (In millions) ----------- Three Months Ended September 30, 2000 ------------------ Written premiums $40 Earned premiums $59 GAAP underwriting result $4 Net investment income $11 Pretax income $17 Net income $6 Acquisitions - ------------ In February 2000, we completed our acquisition of Pacific Select Insurance Holdings, Inc. (Pacific Select), a California company that sells earthquake insurance coverages to California homeowners. The acquisition was accounted for as a purchase, at a cost of approximately $37 million. Pacific Select's results of operations are included in the Catastrophe Risk business center of our Commercial Lines Group segment. In April 2000, we completed our acquisition of MMI Companies, Inc. (MMI), an international health care risk services company that provides integrated products and services in operational consulting, clinical risk management, and insurance and reinsurance in the U.S. and London markets. The acquisition was accounted for as a purchase for approximately $206 million in cash plus the assumption of $165 million of MMI debt and capital securities. The results of MMI's domestic U.S. operations are reported in our Global Healthcare segment, and the results of MMI's U.K.-based operations, Unionamerica Insurance Company Limited (Unionamerica), are included in our International segment. The acquisition of MMI added the following amounts (excluding the impact of the corporate reinsurance program) to our property-liability results of operations for the third quarter and first nine months of 2000: Three Months Nine Months (in millions) Ended Sept. 30, 2000 Ended Sept. 30 2000 ----------- -------------------- ------------------- Written premiums $97 $139 Earned premiums $89 $182 GAAP underwriting result $(102) $(157) Net investment income $19 $37 THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Management's Discussion, Continued Consolidated Highlights (continued) ---------------------------------- Discontinued Operations - ----------------------- In 1999, we sold our standard personal insurance operations to Metropolitan Property and Casualty Insurance Company (Metropolitan). Metropolitan purchased Economy Fire & Casualty Company and subsidiaries (Economy), and the rights and interests in those non-Economy policies constituting the remainder of our standard personal insurance operations. Those rights and interests were transferred to Metropolitan by way of a reinsurance and facility agreement. We guaranteed the adequacy of Economy's loss and loss expense reserves, and we remain liable for claims on non-Economy policies that result from losses occurring prior to the Sept. 30, 1999 closing date. Under the reserve guarantee, we will pay for any deficiencies in those reserves and will share in any redundancies that develop by Sept. 30, 2002. Any losses incurred by us under these agreements are reflected in discontinued operations in the period during which they are incurred. In the first nine months of 2000, we recorded a pretax loss of $5 million in discontinued operations. During the third quarter of 1999, we recognized a pretax gain on proceeds of $138 million and a $136 million pretax gain on third quarter discontinued operations. The third quarter discontinued operations included a reserve reduction of $145 million. In May 2000, we completed the sale of our nonstandard auto insurance operations to Prudential Insurance Company of America (Prudential) for a total cash consideration of approximately $175 million (net of a $25 million dividend paid by these operations to our property-liability insurance operations prior to closing). Prudential purchased the nonstandard auto business marketed under the Victoria Financial and Titan Auto brands. In the first nine months of 2000, we recorded a pretax loss of $13 million in discontinued operations related to these operations, representing their operating results for the first nine months of 2000 plus an additional loss recorded on closing. Global Specialty Reporting Structure - ------------------------------------ In the first quarter of 2000, we implemented a new segment reporting structure for our property-liability insurance business following the fourth-quarter 1999 realignment of our primary insurance underwriting operations into a Global Specialty Practices organization. The most significant change from our previous format involves the inclusion of certain non-U.S. primary business in the respective business segment to which it pertains, which differs from our prior practice of including all non-U.S. business in the International segment. In addition, our Construction business center was moved from the Commercial Lines Group segment to the Other Global Specialty segment, and our Global Healthcare operation is now reported as a separate business segment. Our new reporting format is more closely aligned with the global management of the majority of our specialty insurance products and services. Our International segment includes our operations at Lloyd's and specialty insurance business that we do not manage on a global basis, including MMI's U.K.-based operation, Unionamerica. All prior year data is presented on a basis consistent with our new reporting structure. Property-Liability Insurance ---------------------------- Overview - -------- Our reported premium volume and underwriting results in both 2000 and 1999 were impacted by cessions made under a corporate all- lines, aggregate excess-of-loss reinsurance program (the "corporate reinsurance program"), and cessions made under a separate aggregate excess-of-loss treaty exclusive to our Reinsurance segment (together, the "reinsurance treaties"). The table on the following page summarizes the impact of the reinsurance cessions on our 2000 and 1999 results: THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Management's Discussion, Continued Property-Liability Insurance (continued) --------------------------------------- Three Months Nine Months Ended September 30 Ended September 30 ------------------ ------------------ (In millions) 2000 1999 2000 1999 ----------- ------ ----- ----- ----- Corporate program: Ceded written premiums $183 $129 $263 $129 Ceded earned premiums 193 129 263 129 Ceded losses and loss adjustment expenses 338 235 449 235 ----- ----- ----- ----- Net pretax benefit 145 106 186 106 ----- ----- ----- ----- Reinsurance segment treaty: Ceded written premiums 8 18 64 43 Ceded earned premiums 8 18 64 43 Ceded losses and loss adjustment expenses 8 53 128 109 ----- ----- ----- ----- Net pretax benefit - 35 64 66 ----- ----- ----- ----- Combined total: Ceded written premiums 191 147 327 172 Ceded earned premiums 201 147 327 172 Ceded losses and loss adjustment expenses 346 288 577 344 ----- ----- ----- ----- Net pretax benefit $145 $141 $250 $172 ===== ===== ===== ===== The pretax benefit (detriment) of the reinsurance treaties was allocated to our business segments as follows: Three Months Nine Months Ended September 30 Ended September 30 ------------------ ------------------ (In millions) 2000 1999 2000 1999 ------ ------ ------ ------ Commercial Lines Group $ (5) $ 59 $ (5) $ 59 Global Surety 6 - 6 - Global Healthcare 43 - 43 - Other Global Specialty 40 - 40 - International 57 18 70 18 ----- ----- ----- ----- Total Primary Insurance 141 77 154 77 Reinsurance 4 64 96 95 ----- ----- ----- ----- Total Property- Liability Insurance $145 $141 $250 $172 ===== ===== ===== ===== Under terms of the reinsurance treaties, we pay to our counter- party the ceded earned premiums related to the ceded losses and loss adjustment expenses shortly after coverage under the treaties has been triggered. We recover the ceded loss and loss adjustment expenses from the counter-party as the related claims are settled, which may occur over a period of several years. The loss and loss adjustment expense cessions made under the corporate program in the third quarter of 2000 were solely the result of losses incurred in 2000, whereas the cessions made prior to the third quarter were the result of adverse development on losses incurred during the 1999 accident year. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Management's Discussion, Continued Property-Liability Insurance (continued) --------------------------------------- Our reported consolidated written premiums totaled $1.49 billion in the third quarter of 2000, 22% ahead of reported third quarter 1999 premiums of $1.22 billion. Excluding the impact of the reinsurance cessions in both years and the addition of MMI in 2000, our consolidated third quarter premium volume totaled $1.59 billion, 16% higher than comparable premiums of $1.37 billion in the same period of 1999. On a year-to-date basis, excluding those factors and the impact of the quarter reporting lag elimination, our consolidated written premiums totaled $4.53 billion, an increase of 10% over comparable 1999 premiums of $4.12 billion. Premium growth in 2000 was spread throughout most of our business segments but was most prevalent in the International and Commercial Lines Group segments. Our reported loss ratio, which measures insurance losses and loss adjustment expenses as a percentage of earned premiums, was 61.3 for the third quarter of 2000, compared with a reported loss ratio of 71.8 in the same 1999 period. The reported loss ratios in both years were impacted by the reinsurance treaties, and the 2000 ratio also reflects the effect of the MMI acquisition and a reduction of our estimate of ultimate losses on certain non- traditional reinsurance contracts, totaling $56 million, in our Reinsurance segment (discussed on page 32 of this report). Excluding these factors in both years, the 2000 third quarter loss ratio was 72.7, compared with 85.4 in the same period of 1999. On a year-to-date basis, excluding all of these factors in both years and the impact of the quarter reporting lag elimination in 2000, our consolidated loss ratio was 76.0, compared with 79.2 in 1999. The year-to-date 2000 ratio includes a 2.5 point benefit from a $102 million reduction in workers' compensation reserves in the second quarter related to favorable prior year development. With the exception of our Global Healthcare segment, our domestic primary operations achieved strong improvement in profitability in the first nine months of 2000. Over the last two years, we have taken aggressive actions to improve the quality and profitability of our domestic book of business, particularly in the Commercial Lines Group and Other Global Specialty segments. Those actions focused on eliminating unprofitable business, implementing price increases on new and renewal business, and reducing expenses. Through the first nine months of 2000, we have achieved significant price increases on our standard commercial insurance business as well as on most specialty commercial insurance coverages we offer. We have also achieved significant improvement in the current underwriting year results for the majority of our primary insurance operations. Catastrophe losses totaled $17 million in the third quarter of 2000, the lowest quarterly total in over two years. Catastrophe losses in last year's third quarter totaled $126 million. Through the first nine months of 2000, catastrophe losses totaled $140 million, over half of which were the result of additional loss development arising from severe storms that struck Europe in late 1999. Our reported expense ratio, measuring underwriting expenses as a percentage of premiums written, was 39.0 for the third quarter and 34.6 for the first nine months of 2000, compared with reported expense ratios of 36.6 and 34.1 for the respective periods of 1999. The reported expense ratios in both years were impacted by the reinsurance treaties, and the 2000 ratio also reflects the effect of the MMI acquisition and the $66 million increase in our estimate of the reserves for contingent commissions on certain non-traditional reinsurance business (discussed on page 32 of this report). Excluding these factors in both years, our consolidated expense ratios for the third quarter and first nine months of 2000 were 31.3 and 30.7, respectively, compared with expense ratios of 32.7 for the same 1999 periods. The improvement over the same periods of 1999 reflects the significant growth in written premium volume in 2000 and the efficiencies realized as a result of our expense reduction initiatives over the last two years. The table on the following page summarizes key financial results (from continuing operations) by property-liability underwriting business segment (underwriting results are presented on a GAAP basis; combined ratios are presented on a statutory accounting basis). Results in the table include the impact of the reinsurance treaties described previously. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Management's Discussion, Continued Property-Liability Insurance (continued) --------------------------------------- % of Three Months Ended Nine Months Ended 2000 September 30 September 30 (Dollars in millions) Written ------------------ ------------------ ------------------- Premiums 2000 1999 2000 1999 Commercial Lines Group: -------- ------ ------ ------ ------ Written Premiums 29% $457 319 1,252 1,117 Underwriting Result $15 (38) 48 (179) Combined Ratio 94.6 110.0 95.7 115.2 Global Surety: Written Premiums 8% $102 111 342 332 Underwriting Result $(2) 6 29 33 Combined Ratio 98.5 84.3 88.2 81.7 Global Healthcare: Written Premiums 9% $179 173 419 418 Underwriting Result $(70) (17) (135) (64) Combined Ratio 146.1 110.6 131.2 116.7 Other Global Specialty: Written Premiums 25% $391 377 1,107 1,048 Underwriting Result $6 (83) (22) (143) Combined Ratio 94.4 121.9 100.7 113.1 International: Written Premiums 8% $87 43 362 251 Underwriting Result $ - 3 (60) (17) Combined Ratio 93.8 99.1 114.4 103.7 --- ----- ----- ----- ----- Total Primary Insurance: Written Premiums 79% $1,216 1,023 3,482 3,166 Underwriting Result $(51) (129) (140) (370) Combined Ratio 101.2 110.7 103.3 111.3 Reinsurance: Written Premiums 21% $276 199 901 782 Underwriting Result $4 15 (74) 44 Combined Ratio 100.3 98.1 109.0 93.1 --- ----- ----- ----- ----- Total Property- Liability Insurance: Written Premiums 100% $1,492 1,222 4,383 3,948 === GAAP Underwriting Result $(47) (114) (214) (326) Statutory Combined Ratio: Loss and Loss Expense Ratio 61.3 71.8 69.9 73.8 Underwriting Expense Ratio 39.0 36.6 34.6 34.1 ----- ----- ----- ----- Combined Ratio 100.3 108.4 104.5 107.9 ===== ===== ===== ===== THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Management's Discussion, Continued Property-Liability Insurance (continued) --------------------------------------- Underwriting Results by Segment - ------------------------------- The following discussion of our underwriting segments will focus on results excluding the impact of the reinsurance treaties, discussed previously, in both 2000 and 1999. Commercial Lines Group - ---------------------- The Commercial Lines Group segment includes our standard commercial and catastrophe risk business centers, as well as the results of our limited involvement in insurance pools. The following table summarizes results for this segment excluding the impact of the corporate reinsurance program in both years. Three Months Nine Months Ended September 30 Ended September 30 ------------------ ------------------ (Dollars in millions) 2000 1999 2000 1999 ------------------- ----- ----- ----- ----- Net written premiums $463 $392 $1,258 $1,189 Percentage increase over 1999 18% 6% GAAP underwriting result $21 $(97) $53 $(238) Loss and loss adjustment expense ratio 62.8 88.6 62.7 84.4 Underwriting expense ratio 30.6 34.3 32.6 34.5 ----- ----- ----- ----- Combined ratio 93.4 122.9 95.3 118.9 ===== ===== ===== ===== Premium growth in the third quarter and first nine months of 2000 was driven by price increases on renewal business in our standard commercial operation. Our business retention levels on those policies targeted for renewal have remained steady in 2000 despite sizeable price increases. Year-to-date catastrophe risk written premiums of $99 million were $42 million higher than the same period of 1999, primarily due to our acquisition of Pacific Select, which underwrites earthquake coverages in California. The significant improvement in this segment's third quarter and year-to-date underwriting result reflect the combined impact of price increases and our profit improvement initiatives over the last several years. The current accident year loss ratio in 2000 improved 17.5 points over the first nine months of 1999. Over the last two years, we have taken aggressive steps to improve our book of standard commercial business through the nonrenewal of unprofitable business and the implementation of significant price increases. The year-to-date underwriting result included a $69 million benefit from the favorable prior year development on workers' compensation reserves. We expect continued improvement in this segment during the final quarter of the year. Global Surety - ------------- Our Global Surety segment underwrites surety bonds, which guarantee that third parties will be indemnified against the nonperformance of contractual obligations. The following table summarizes results for this segment excluding the impact of the corporate reinsurance program. Three Months Nine Months Ended September 30 Ended September 30 ------------------ ------------------ (Dollars in millions) 2000 1999 2000 1999 ------------------- ----- ----- ----- ----- Net written premiums $113 $111 $353 $332 Percentage increase over 1999 1% 6% GAAP underwriting result $(8) $6 $23 $33 Loss and loss adjustment expense ratio 54.0 35.3 41.6 32.9 Underwriting expense ratio 50.7 49.0 49.0 48.8 ----- ----- ----- ----- Combined ratio 104.7 84.3 90.6 81.7 ===== ===== ===== ===== THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Management's Discussion, Continued Property-Liability Insurance (continued) --------------------------------------- The pace of premium growth in the Global Surety segment slowed in the third quarter of 2000, reflecting tightened underwriting standards implemented in recent quarters due to the potential for slower economic growth. Also impacting our premium growth was a slowdown in the rate of public construction spending in the United States. The 6% increase in year-to-date premium volume resulted from additional business from our existing customer base, as well as from new customers. Underwriting results in the third quarter of 2000 were adversely impacted by losses in our Mexican operations, where we have implemented corrective underwriting and claim-handling initiatives designed to mitigate our exposure to losses. Global Healthcare - ----------------- Our Global Healthcare segment (formerly Medical Services) provides property-liability insurance throughout the entire health care delivery system. The following table summarizes results excluding the impact of the corporate reinsurance program. Three Months Nine Months Ended September 30 Ended September 30 ------------------ ------------------ (Dollars in millions) 2000 1999 2000 1999 ------------------- ----- ----- ----- ----- Net written premiums $234 $173 $474 $418 Percentage increase over 1999 36% 14% GAAP underwriting result $(113) $(17) $(178) $(64) Loss and loss adjustment expense ratio 135.2 86.7 110.1 91.1 Underwriting expense ratio 21.2 23.9 26.0 25.6 ----- ----- ----- ----- Combined ratio 156.4 110.6 136.1 116.7 ===== ===== ===== ===== Global Healthcare written premium volume for the third quarter and first nine months of the year included premiums of $48 million and $61 million, respectively, from MMI's domestic operations. Excluding MMI, third quarter premium volume increased 8% over the same 1999 period. Premium volume in the first nine months of 1999 included a $37 million premium recorded on one three-year policy; excluding that premium and MMI's incremental contribution in 2000, year-to-date premium volume in 2000 was 8% ahead of the same period of 1999. The premium growth in 2000 resulted from a combination of price increases and higher business retention ratios on accounts targeted for renewal. Underwriting results in this segment deteriorated markedly from 1999, concentrated primarily in two lines of business - nursing home facilities and major accounts. MMI's domestic operations accounted for $90 million and $130 million, respectively, of the third quarter and nine-month underwriting loss in 2000. These losses reflect the impact of reserve strengthening subsequent to our acquisition of MMI in April of this year. As MMI policies renew, we continue to re-underwrite the book of business by not renewing unprofitable business and implementing significant price increases. The remainder of our Global Healthcare segment excluding MMI improved over the first nine months of 1999, posting a combined ratio of 111.5, over five points lower than the comparable 1999 ratio. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Management's Discussion, Continued Property-Liability Insurance (continued) --------------------------------------- Other Global Specialty - ---------------------- The Other Global Specialty segment includes the following business centers: Construction, Technology, Ocean Marine, Financial and Professional Services, Public Sector Services, and Excess and Surplus Lines. The following table summarizes results excluding the impact of the corporate reinsurance program. Three Months Nine Months Ended September 30 Ended September 30 ------------------ ------------------ (Dollars in millions) 2000 1999 2000 1999 ------------------- ----- ----- ----- ----- Net written premiums $451 $377 $1,168 $1,048 Percentage increase over 1999 20% 11% GAAP underwriting result $(34) $(83) $(62) $(143) Loss and loss adjustment expense ratio 78.2 91.7 75.1 82.2 Underwriting expense ratio 28.4 30.2 29.5 30.9 ----- ----- ----- ----- Combined ratio 106.6 121.9 104.6 113.1 ===== ===== ===== ===== Premium growth in the third quarter and first nine months of 2000 was centered in our Technology business center, due to significant new business, strong business retention rates and price increases. Technology written premiums of $89 million in the third quarter increased 67% over the same period of 1999, and year-to-date premium volume of $229 million was 47% ahead of 1999. Construction premium volume increased by only 1% in the first nine months of 2000, reflecting our continuing efforts to improve the quality of this book of business through the nonrenewal of unprofitable and inadequately priced business. Financial and Professional Services, and Public Sector Services recorded strong premium growth in 2000, primarily the result of price increases. Premium volume in Ocean Marine and Excess and Surplus Lines declined, however, reflecting our efforts to eliminate unprofitable business from these operations. The significant improvement in underwriting results in this segment in 2000 was centered in the Construction and Ocean Marine business centers. In Construction, the third quarter underwriting loss of $22 million was $11 million less than the comparable 1999 loss, primarily due to improvement in the current accident year loss ratio, which reflects the impact of corrective underwriting and pricing actions implemented in this operation over the last two years. Year-to-date results in Construction also include a $33 million benefit from the reduction in workers' compensation reserves recorded in the second quarter. The improvement in Ocean Marine results in 2000 resulted primarily from our late-1999 withdrawal from underwriting Midwest river transportation business, which had generated poor results. The Technology business center recorded a third quarter underwriting profit of $15 million, driven by favorable current and prior year loss experience. International - ------------- Under our new Global Specialty reporting structure, our International segment consists of our operations at Lloyd's, and specialty business that is not managed on a global basis. In addition, beginning in the second quarter of 2000, this segment includes the results of MMI's London-based insurance and reinsurance operation, Unionamerica. The following table summarizes results excluding the impact of the corporate reinsurance program. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Management's Discussion, Continued Property-Liability Insurance (continued) --------------------------------------- Three Months Nine Months Ended September 30 Ended September 30 ------------------ ------------------ (Dollars in millions) 2000 1999 2000 1999 ------------------- ----- ----- ----- ----- Net written premiums $150 $65 $448 $273 Percentage increase over 1999 133% 64% GAAP underwriting result $(57) $(15) $(130) $(34) Loss and loss adjustment expense ratio 105.8 81.1 101.0 81.4 Underwriting expense ratio 29.8 43.2 29.2 31.6 ----- ----- ----- ----- Combined ratio 135.6 124.3 130.2 113.0 ===== ===== ===== ===== Unionamerica accounted for $50 million of written premiums in the third quarter and $80 million through the first nine months of 2000. Excluding Unionamerica, our International segment's written premium growth rates for the third quarter and first nine months of 2000 were 55% and 35%, respectively. The majority of that growth occurred in our Lloyd's operation as a result of additional investment in Lloyd's syndicates, and the addition of new underwriting teams. Underwriting results for the third quarter and first nine months of 2000 included losses of $24 million and $39 million, respectively, incurred by Unionamerica, which resulted primarily from provisions to strengthen prior accident year reserves. Although the majority of our Lloyd's syndicates have performed well in 2000, several other syndicates, which underwrite aviation and professional liability coverages, accounted for the bulk of our remaining losses in the International segment in 2000. We have implemented corrective underwriting initiatives and made management changes in these syndicates in an effort to improve results. Reinsurance - ----------- The St. Paul's Reinsurance segment underwrites treaty and facultative reinsurance for property, liability, ocean marine, surety and certain specialty classes of business, and provides products and services to the alternative risk transfer market. The following table summarizes this segment's results excluding the impact of the reinsurance treaties. Three Months Nine Months Ended September 30 Ended September 30 ------------------ ------------------ (Dollars in millions) 2000 1999 2000 1999 ------------------- ----- ----- ----- ----- Net written premiums $265 $234 $946 $817 Percentage increase over 1999 13% 16% GAAP underwriting result $- $(14) $(106) $15 Loss and loss adjustment expense ratio 42.7 77.2 76.8 66.1 Underwriting expense ratio 60.6 32.3 35.5 31.4 ----- ----- ----- ----- Combined ratio 103.3 109.5 112.3 97.5 ===== ===== ===== ===== The increase in premium volume for the third quarter and first nine months of 2000 was driven by significant price increases across virtually all lines of business, as well as new business in the non-traditional reinsurance marketplace. Year-to-date written premiums include the $40 million incremental impact of eliminating the one-quarter reporting lag for St. Paul Re - UK. Excluding that adjustment, written premiums of $906 million were 11% higher than the first nine months of 1999. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Management's Discussion, Continued Property-Liability Insurance (continued) --------------------------------------- This segment's breakeven underwriting result for the third quarter was driven by the lack of significant catastrophe losses, and the absence of further loss development from severe European wind storms at the end of 1999. During the third quarter, we reduced our estimate of ultimate losses on certain non- traditional reinsurance business by $56 million and made a corresponding increase in our estimate of the reserves for contingent commissions by $66 million. These changes in estimate distorted the components of the third quarter combined ratio. Excluding those changes in estimate and the impact of the reinsurance treaties, the loss and loss adjustment expense ratio for the third quarter would have been 62.4, and the underwriting expense ratio would have been 35.6. Underwriting results for the first nine months of 2000 were severely impacted by catastrophe losses totaling $121 million, the majority of which resulted from additional loss development from the 1999 European storms. Investment Operations - --------------------- The St. Paul's property-liability insurance operations generated pretax investment income of $312 million in the third quarter of 2000, down 2% from income of $317 million in the same period of 1999. Our acquisition of MMI added $19 million of pretax investment income in the third quarter; excluding that amount, investment income would have been approximately 6% below the third quarter of 1999. Our year-to-date pretax investment income of $943 million was 1% below comparable 1999 income of $951 million. However, excluding the MMI acquisition, and the $11 million of incremental pretax investment income resulting from the elimination of the quarter reporting lag, year-to-date investment income in 2000 would have been approximately 5% below the comparable 1999 total. The sale of our standard personal insurance operations in September 1999 resulted in the transfer of approximately $325 million of invested assets to Metropolitan, contributing to the decline in investment income compared with the third quarter and first nine months of 1999. In addition, negative underwriting cash flows over the last several quarters have resulted in the net sale of fixed maturity investments to fund operational cash flow requirements. Included in the year-to- date negative underwriting cash flows were $163 million of premium payments made in 2000 for cessions made under the corporate reinsurance program. Pretax realized investment gains in our property-liability insurance operations totaled $104 million in the third quarter, pushing the year-to-date 2000 total to $542 million. Both amounts were significantly higher than the comparable 1999 totals of $38 million and $170 million, respectively. The year-to-date total in 2000 was driven by gains of $447 million from our venture capital portfolio, with the single largest gain ($117 million) resulting from the sale of our investment in Flycast Communications Corp., a leading provider of Internet direct response solutions. We also sold several other direct holdings, and our investments in various venture capital partnerships also contributed to our record nine-month realized gain total. In addition, sales of equity investments generated $107 million of pretax realized gains in the first nine months of the year. The market value of our $15.8 billion fixed maturities portfolio on Sept. 30, 2000 included $133 million of pretax unrealized appreciation. Our acquisition of MMI in April 2000 added approximately $1 billion of high-quality fixed maturity investments to our portfolio. Approximately 95% of our portfolio is rated at investment grade (BBB or above), and its weighted average pretax yield at Sept. 30, 2000 was 6.8%. The combined $2.6 billion carrying value of our equity and venture capital investments at Sept. 30, 2000 included pretax unrealized appreciation of $1.0 billion. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Management's Discussion, Continued Environmental and Asbestos Claims --------------------------------- We continue to receive claims alleging injury or damage from environmental pollution or seeking payment for the cost to clean up polluted sites. We also receive asbestos injury claims arising out of product liability coverages under general liability policies. The vast majority of these claims arise from policies written many years ago. Our alleged liability for both environmental and asbestos claims is complicated by significant legal issues, primarily pertaining to the scope of coverage. In our opinion, court decisions in certain jurisdictions have tended to broaden insurance coverage beyond the intent of original insurance policies. Our ultimate liability for environmental claims is difficult to estimate because of these legal issues. Insured parties have submitted claims for losses not covered in their respective insurance policies, and the ultimate resolution of these claims may be subject to lengthy litigation, making it difficult to estimate our potential liability. In addition, variables, such as the length of time necessary to clean up a polluted site and controversies surrounding the identity of the responsible party and the degree of remediation deemed necessary, make it difficult to estimate the total cost of an environmental claim. Estimating our ultimate liability for asbestos claims is equally difficult. The primary factors influencing our estimate of the total cost of these claims are case law and a history of prior claim development, both of which continue to evolve. The following table represents a reconciliation of total gross and net environmental reserve development for the nine months ended Sept. 30, 2000, and the years ended Dec. 31, 1999 and 1998. Amounts in the "net" column are reduced by reinsurance recoverables. 2000 Environmental (nine months) 1999 1998 - ------------- ----------- ------------ ------------ (In millions) Gross Net Gross Net Gross Net ----- ---- ----- ---- ----- ---- Beginning reserves $698 $599 $783 $645 $867 $677 Incurred losses 14 11 (33) 1 (16) 26 Paid losses (45) (38) (52) (47) (68) (58) ----- ----- ----- ----- ----- ----- Ending reserves $667 $572 $698 $599 $783 $645 ===== ===== ===== ===== ===== ===== The following table represents a reconciliation of total gross and net reserve development for asbestos claims for the nine months ended Sept. 30, 2000, and the years ended Dec. 31, 1999 and 1998. 2000 Asbestos (nine months) 1999 1998 - -------- ------------ ------------ ------------ (In millions) Gross Net Gross Net Gross Net ----- ---- ----- ---- ----- ---- Beginning reserves $398 $298 $402 $277 $397 $279 Incurred losses 35 22 28 51 44 13 Paid losses (31) (22) (32) (30) (39) (15) ----- ----- ----- ----- ----- ----- Ending reserves $402 $298 $398 $298 $402 $277 ===== ===== ===== ===== ===== ===== Our reserves for environmental and asbestos losses at Sept. 30, 2000 represent our best estimate of our ultimate liability for such losses, based on all information currently available. Because of the inherent difficulty in estimating such losses, however, we cannot give assurances that our ultimate liability for environmental and asbestos losses will, in fact, match current reserves. We continue to evaluate new information and developing loss patterns, but we believe any future additional loss provisions for environmental and asbestos claims will not materially impact our results of operations, liquidity or financial position. Total gross environmental and asbestos reserves at Sept. 30, 2000 of $1.07 billion represented approximately 6% of gross consolidated reserves of $18.65 billion. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Management's Discussion, Continued Life Insurance -------------- Our life insurance segment consists primarily of Fidelity and Guaranty Life Insurance Company and subsidiaries ("F&G Life"). F&G Life's primary products are deferred annuities (including tax- sheltered annuities and equity indexed annuities), structured settlement annuities and immediate annuities. F&G Life also underwrites traditional life and universal life insurance products. Highlights of F&G Life's financial performance for the third quarter and first nine months of 2000 and 1999 were as follows: Three Months NineMonths Ended Sept. 30 Ended Sept. 30 -------------- -------------- (In millions) 2000 1999 2000 1999 ---- ----- ----- ----- Pretax earnings $15 $20 $32 $48 Sales (annualized premiums) $306 $145 $793 $761 Premiums and policy charges $77 $62 $185 $127 Policy surrenders $83 $55 $325 $155 Net investment income $88 $68 $260 $221 Life insurance in force $16,297 $11,672 F&G Life's pretax earnings in the third quarter and first nine months of 2000 benefited from growth in assets under management, driven by continued strong product sales and positive operating cash flows, offset by an increase in product development and channel expansion expenses, and an increase in mortality and surrender costs. Pretax earnings for the first nine months of 2000 and 1999 include realized investment losses of $25 million and $8 million, respectively. Pretax results in the first nine months of 2000 also include $1.9 million of interest expense on an intercompany note payable to The St. Paul's property-liability operations. Excluding realized investment losses in both years, and the intercompany interest expense in 2000, pretax earnings of $59 million for the first nine months of 2000 were $3 million higher than comparable 1999 earnings. After-tax earnings on a similar basis also improved over 1999 levels, reflecting the impact of F&G Life's adoption of an investment strategy to allocate 1% of its investment portfolio to tax-favored securities. These investments, while typically contributing little or no operating earnings, generated tax credits that lowered F&G Life's effective tax rate from 28% in 1999 to 25% in 2000. The increase in sales volume in the third quarter and first nine months of 2000 compared with the same periods of 1999 was the result of growth in fixed interest rate annuity sales. This increase was partially offset by a decline in equity-indexed annuity (EIA) sales in 2000. Sales of fixed interest rate annuities in 2000 continued their momentum from late 1999, as the overall level of market interest rates increased and fluctuations in equity markets resulted in a shift away from EIA sales. Credited interest rates on the EIA products are tied to the performance of leading market indices. Sales of EIA products were unusually high in the first quarter of 1999 due to the continued popularity of F&G Life's first-generation portfolio of EIA products that had been introduced in mid - 1998. The demand for annuity products is affected by fluctuating interest rates and the relative attractiveness of alternative investments, particularly equity-based products. Traditional life insurance sales in the first nine months of 2000 were 41% higher than the same period of 1999, reflecting the continued success of a new term life product line launched in 1999 targeted at the mortgage protection market. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Management's Discussion, Continued Life Insurance (continued) ------------------------- F&G Life hedges its exposure on its EIA products by purchasing options with terms similar to the market index component to provide the same return as F&G Life guarantees to the annuity contract holder, subject to minimums guaranteed in the annuity contract. At Sept. 30, 2000, F&G Life held options with a notional amount of $1.13 billion and a market value of $23 million. Premiums and policy charges increased in the third quarter and first nine months of 2000 compared with the same periods of 2000, primarily the result of growth in the sale of structured settlement annuities and life-contingent single premium immediate annuities (SPIA). Structured settlement annuities are sold primarily to property-liability insurers to fund the settlement of insurance claims. The continued expansion of the structured settlement program into The St. Paul's property-liability claim organization accounts for the increase in sales volume. The growth in SPIA sales resulted from an increase in marketing emphasis on this product. Policy charges from surrenders on tax sheltered and equity indexed annuities also contributed to the overall increase in premiums and policy charges. Sales of structured settlement annuities, annuities with life contingencies and term life insurance are recognized as premiums earned under GAAP. However, sales of investment-type contracts, such as equity-indexed, deferred and tax sheltered annuities and universal life-type contracts are recorded directly on the balance sheet on a deposit accounting basis and are not recognized as premium revenue under GAAP. Deferred annuities and universal life products are subject to surrender by policyholders. Nearly all of F&G Life's surrenderable annuity policies allow a refund of the cash value balance less a surrender charge. Several different products contributed to the increase in surrender activity in the first nine months of 2000. Surrenders on tax-sheltered annuities increased due to F&G Life's transition from one exclusive distribution partner to a new network of approximately 15 distributors. EIA surrenders have increased naturally, as a result of the significant growth in the size of the EIA book of business. F&G Life has written over $1 billion in EIA business since the products were introduced in mid - 1998. Surrenders have increased on fixed interest rate annuities as a larger amount of these annuity policies have reached the end of their interest rate gaurantee period. Net investment income grew 18% in the first nine months of 2000 as a result of an increasing asset base generated by positive cash flow. The 40% increase in life insurance in force over the same time a year ago reflects the sales of the new term life product line introduced in mid - 1999. Asset Management ---------------- Our asset management segment consists of our 78% majority ownership interest in The John Nuveen Company (Nuveen). Nuveen provides customized individual accounts, mutual funds, exchange- traded funds and defined portfolios to help financial advisors serve their affluent and high net worth clients. Highlights of Nuveen's performance for the third quarter and first nine months of 2000 and 1999 were as follows: Three Months Nine Months Ended Sept. 30 Ended Sept. 30 -------------- -------------- (In millions) 2000 1999 2000 1999 ----------- ---- ---- ---- ---- Revenues $92 $87 $280 $256 Expenses 49 48 150 140 ---- ---- ---- ---- Pretax earnings 43 39 130 116 Minority interest (10) (9) (30) (27) ---- ---- ---- ---- The St. Paul's share of pretax earnings $33 $30 $100 $89 ==== ==== ==== ==== Assets under management $61,003 $58,252 ====== ====== THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Management's Discussion, Continued Asset Management (continued) --------------------------- Earnings growth in 2000 was driven by continuing strong sales of Nuveen's increasingly diverse range of investment products. Nuveen's core equity and fixed income products have become increasingly attractive in 2000 as investors continued to balance their portfolios in a volatile market environment. This has enabled Nuveen to achieve earnings growth in a period during which most leading market indices have declined. Nuveen had positive net flows (equal to the sum of sales, reinvestments and exchanges, less redemptions) of $1.1 billion in the third quarter of 2000. Sales of retail managed accounts, where Nuveen's focus is on blue-chip equities and fixed income products, were strong in the third quarter. Demand for Nuveen's defined portfolio products also remained high, with one newly-introduced trust alone generating new sales of over $570 million in the first nine months of the year. Managed assets at Sept. 30, 2000 consisted of $27.6 billion of exchange-traded funds, $21.7 billion of managed accounts, $11.3 billion of mutual funds and $476 million of money market funds. Equity securities now account for approximately 35% of Nuveen's assets under management. Including defined portfolios, Nuveen managed or oversaw approximately $73 billion in assets at Sept. 30, 2000. Capital Resources ----------------- Common shareholders' equity totaled $7.0 billion at Sept. 30, 2000, an increase of $550 million over the year-end 1999 total of $6.45 billion. The growth in equity resulted from our strong net income through nine months and the conversion of securities into common stock (as described below), offset in part by year-to-date common share repurchases in excess of $500 million. In July 2000, St. Paul Capital LLC, our wholly-owned subsidiary, provided notice to the holders of its $207 million, 6% Convertible Monthly Income Preferred Securities (MIPS) that it was exercising it right to cause the conversion rights of the owners of the MIPS to expire on August 14, 2000. Each of the 4,140,000 MIPS outstanding was convertible into 1.695 shares of our common stock. Prior to the expiration date, holders of virtually all (4,133,914) of the MIPS exercised their conversion rights, resulting in the issuance of 7,006,954 of our common shares. The remaining MIPS were redeemed for cash at $50 per security, plus accumulated dividends. Prior to their conversion, the MIPS had been considered common stock equivalents for purposes of our diluted earnings per share calculation. In the third quarter, we repurchased 3.8 million of our common shares for a total cost of $180 million, or an average of $47.51 per share. Through the first nine months of 2000, we repurchased 17.4 million common shares for a total cost of $512 million, or an average cost of $29.46 per share. Our share repurchases were financed through a combination of internally-generated funds and the issuance of debt. Since November 1998, we have repurchased and retired 32.3 million of our common shares for a total cost of $1 billion. Total debt outstanding at Sept. 30, 2000 of $1.64 billion was $170 million higher than the year-end 1999 total of $1.47 billion. In April 2000, we issued $500 million of senior debt, the proceeds of which were used to repay a portion of our commercial paper borrowings and for general corporate purposes. Of the debt issued, $250 million is due in April 2005 and bears an interest rate of 7.875%, and $250 million is due in 2010 and bears an interest rate of 8.125%. In February 2000, we repaid $46 million of floating rate notes that had been issued by a special purpose offshore entity that provided reinsurance to one of our subsidiaries. In April 2000, we assumed $45 million of short-term borrowings as part of our acquisition of MMI; that debt was paid off in its entirety shortly after the acquisition was completed. We also assumed MMI's obligations on $125 million of capital securities bearing an annual dividend rate of 7.625%. Those securities are classified as "Company-obligated mandatorily redeemable preferred capital securities of subsidiaries or trusts holding solely subordinated debentures of the company" on our consolidated balance sheet at Sept. 30, 2000. The ratio of total debt to total capitalization of 18% at Sept. 30, 2000 was unchanged from the year-end 1999 ratio. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Management's Discussion, Continued Capital Resources (continued) ---------------------------- We anticipate that any major capital expenditures during the remainder of 2000 would involve further repurchases of our common shares or acquisitions of existing businesses. At Sept. 30, 2000, we had approximately $198 million of capacity to repurchase additional common shares under a repurchase program authorized by the company's board of directors in May 2000. We repurchase our shares in the open market and through private transactions when we deem such repurchases to be a prudent use of capital. We have no major capital improvements planned for the remainder of 2000. For the first nine months of 2000, our ratio of earnings to fixed charges was 9.79, compared with 6.35 for the same period of 1999. Our ratio of earnings to combined fixed charges and preferred stock dividend requirements was 9.03, compared with 5.82 for the same period of 1999. Fixed charges consist of interest expense, dividends on preferred capital securities and that portion of rental expense deemed to be representative of an interest factor. Liquidity --------- Liquidity is a measure of our ability to generate sufficient cash flows to meet the short- and long-term cash requirements of our business operations. Net cash flows used by continuing operations totaled $454 million in the first nine months of 2000, compared with cash provided by continuing operations of $137 million in the same period of 1999. The deterioration in 2000 was primarily due to significant loss payments in our Reinsurance and Global Healthcare segments, and premium payments of $163 million related to our corporate reinsurance program. The operational cash flow shortfall was partially funded by investment sales generating net proceeds of $432 million. We expect our operational cash flows to improve in 2001 as the full impacts of price increases and improvements in the quality of our book of business are realized. On a long-term basis, we believe our operational cash flows will benefit from the corrective pricing and underwriting actions under way in our property- liability operations. Our financial strength and conservative level of debt provide us with the flexibility and capacity to obtain funds externally through debt or equity financings on both a short-term and long-term basis should the need arise. Year 2000 Claims ---------------- The "Year 2000" issue refers to computer programming limitations that had the potential to cause information technology systems to incorrectly process certain dates and date-related information, including the incorrect interpretation of the two-digit year code of "00" as the year 1900, instead of the year 2000, at the turn of the century. We have received some Year 2000-related claims and we could face additional Year 2000 claims under coverages provided by insurance or reinsurance policies sold to insured parties who have incurred, or have taken action claimed to prevent, losses as a result of the failure of such parties, or the customers or vendors of such parties, to be Year 2000 compliant. For example, like other property-liability insurers, we have received claims for reimbursement of expenses incurred by policyholders in connection with their Year 2000 compliance efforts. Because coverage determinations depend on unique factual situations, specific policy language and other variables, it is not possible to determine at this time whether and to what extent insured parties have incurred losses, the amount of the losses or whether any such losses will be covered under our insurance or reinsurance policies. With respect to Year 2000-related claims in general, in some instances, coverage is not provided under the insurance policies or reinsurance policies, while in other instances, coverage may be provided under certain circumstances. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Management's Discussion, Continued Year 2000 Claims (continued) --------------------------- Our standard property and inland marine policies require, among other things, direct physical loss or damage from a covered cause of loss as a condition of coverage. In addition, it is a fundamental principle of all insurance that a loss must be fortuitous to be considered potentially covered. Given the fact that Year 2000-related losses were not unforeseen, and that we expect that such losses did not, in most if not all cases, cause direct physical loss or damage, we have concluded that our property and inland marine policies do not generally provide coverage for losses relating to Year 2000 issues. To reinforce our view on coverage afforded by such policies, we implemented a specific Year 2000 exclusion endorsement. We do not believe that Year 2000-related insurance or reinsurance coverage claims will have a material adverse effect on our earnings, cash flows or financial position. However, the uncertainties of litigation are such that unexpected policy interpretations could compel claim payments substantially beyond our coverage intentions, possibly resulting in a material adverse effect on our results of operations and/or cash flows and a material adverse effect on our consolidated financial position. Impact of Accounting Pronouncements to be Adopted in the Future --------------------------------------------------------------- In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet, and measure those instruments at fair value. In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," which amended SFAS No. 133 to make it effective for all quarters of fiscal years beginning after June 15, 2000, and prohibits retroactive application to financial statements of prior periods. In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," as an additional amendment to SFAS No. 133, to address a limited number of issues causing implementation difficulties. We intend to implement the provisions of SFAS No. 133, as amended, in the first quarter of 2001. Our property-liability operations currently have limited involvement with derivative instruments, primarily for purposes of hedging against fluctuations in market indices, foreign currency exchange rates and interest rates. Our life insurance operation purchases options to hedge its obligation to pay credited rates on equity-indexed annuity products. We expect the impact of adoption to be immaterial to our financial position and results of operations for the period of adoption. In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - a replacement of FASB Statement No. 125." It revises the standards for accounting for securitizations and other transfers of financial assets and collateral and requires certain disclosures, but it carries over most of SFAS No. 125's provisions without reconsideration. The Statement is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31, 2001, with the collateral and disclosure requirements effective for fiscal years ending after Dec. 15, 2000. We intend to implement SFAS No. 140 in the periods during which its provisions become effective, and expect the impact of adoption to be immaterial to our financial position and results of operations for future periods. THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Management's Discussion, Continued Forward-looking Statement Disclosure ------------------------------------ This report contains certain forward-looking statements within the meaning of the Private Litigation Reform Act of 1995. Forward-looking statements are statements other than historical information or statements of current condition. Words such as expects, anticipates, intends, plans, believes, seeks or estimates, or variations of such words, and similar expressions are also intended to identify forward-looking statements. Examples of these forward-looking statements include statements concerning: market and other conditions and their effect on future premiums, revenues, earnings, cash flow and investment income; price increases, improved loss experience, and expense savings resulting from the restructuring actions announced in recent years. In light of the risks and uncertainties inherent in future projections, many of which are beyond our control, actual results could differ materially from those in forward-looking statements. These statements should not be regarded as a representation that anticipated events will occur or that expected objectives will be achieved. Risks and uncertainties include, but are not limited to, the following: competitive considerations, including the ability to implement price increases and possible actions by competitors; general economic conditions including changes in interest rates and the performance of financial markets; changes in domestic and foreign laws, regulations and taxes; changes in the demand for, pricing of, or supply of insurance or reinsurance; catastrophic events of unanticipated frequency or severity; loss of significant customers; judicial decisions and rulings; the pace and effectiveness of the transfer of the standard personal insurance business to Metropolitan; the pace and effectiveness of the transfer of the nonstandard auto operations to Prudential; the pace and effectiveness of our integration of MMI Companies, Inc.; and various other matters. Actual results and experience relating to Year 2000 issues could differ materially from anticipated results or other expectations as a result of a variety of risks and uncertainties, including unanticipated judicial interpretations of the scope of the insurance or reinsurance coverage provided by our policies. We undertake no obligation to release publicly the results of any future revisions we may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. PART II OTHER INFORMATION Item 1. Legal Proceedings. The information set forth in Note 7 to the consolidated financial statements is incorporated herein by reference. Item 2. Changes in Securities. Not applicable. Item 3. Defaults Upon Senior Securities. Not applicable. Item 4. Submission of Matters to a Vote of Security Holders. Not applicable. Item 5. Other Information. Not applicable. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. An Exhibit Index is set forth as the last page in this document. (b) Reports on Form 8-K. 1) The St. Paul filed a Form 8-K Current Report dated August 28, 2000, relating to the completion of a $1 billion shelf registration with the Commission. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE ST. PAUL COMPANIES, INC. (Registrant) Date: November 14, 2000 By /s/ Bruce A. Backberg ----------------- --------------------- Bruce A. Backberg Senior Vice President - Legal Services (Authorized Signatory) Date: November 14, 2000 By /s/ Thomas A. Bradley ----------------- --------------------- Thomas A. Bradley Senior Vice President - Finance (Principal Accounting Officer) EXHIBIT INDEX ----------------------- Exhibit - --------- (2) Plan of acquisition, reorganization, arrangement, liquidation or succession*.............................. (3) (i) Articles of incorporation*............................. (ii) By-laws*.............................................. (4) Instruments defining the rights of security holders, including indentures*................................... (10) Material contracts (a) Amendment to the Amended and Restated 1994 Stock Incentive Plan**................................(1) (b) Amendment to the 1988 Stock Option Plan**..............(1) (11) Statement re computation of per share earnings**...........(1) (12) Statement re computation of ratios**.......................(1) (15) Letter re unaudited interim financial information*......... (18) Letter re change in accounting principles*................. (19) Report furnished to security holders*...................... (22) Published report regarding matters submitted to vote of security holders*............................... (23) Consents of experts and counsel*........................... (24) Power of attorney*......................................... (27) Financial data schedule**.................................(1) (99) Additional exhibits*...................................... * These items are not applicable. ** This exhibit is included only with the copies of this report that are filed with the Securities and Exchange Commission. However, a copy of the exhibit may be obtained from the Registrant for a reasonable fee by writing to The St. Paul Companies, Inc., 385 Washington Street, Saint Paul, MN 55102, Attention: Corporate Secretary. (1) Filed herewith. EX-10 2 0002.txt EXHIBIT 10(a) The following amendments were made to the Registrant's Amended and Restated 1994 Stock Incentive Plan: 1. Section 7 was amended by adding the following sentence at the end thereof: The Committee may, with the consent of the Participant, cancel any outstanding stock option in consideration of a cash payment in an amount not in excess of the difference between the aggregate fair market value (on the date of purchase) of the shares subject to the stock option and the aggregate option price of such shares. 2. Section 10 was amended by adding the following sentence at the end thereof: The Committee may, on behalf of the Company, approve the purchase by the Company of any shares subject to an award of restricted stock, to the extent vested, for an amount equal to the aggregate fair market value of such shares on the date of purchase. EX-10 3 0003.txt EXHIBIT 10(b) The following amendment was made to the Registrant's 1988 Stock Option Plan: Section 6(e) was amended by adding the following paragraph at the end thereof: The Committee may, with the consent of the Optionee, cancel any outstanding Option in consideration of a cash payment in an amount not in excess of the difference between the aggregate Fair Market Value (on the date of purchase) of the shares subject to the Option and the aggregate Option price of such shares. EX-11 4 0004.txt Exhibit 11 THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Computation of Earnings Per Share Three Months Ended Nine Months Ended September 30 September 30 ------------------ ------------------ 2000 1999 2000 1999 ------ ------ ------ ------ (In millions except per share data) EARNINGS Basic: Net income, as reported $231 $327 $800 $696 Dividends on preferred stock, net of taxes (2) (2) (6) (6) Premium on preferred shares redeemed (3) (1) (9) (3) ----- ----- ----- ----- Net income available to common shareholders $226 $324 $785 $687 ===== ===== ===== ===== Diluted: Net income available to common shareholders $226 $324 $785 $687 Effect of dilutive securities: Convertible preferred stock 2 2 5 5 Convertible monthly income preferred securities 1 2 5 6 Zero coupon convertible notes 1 1 2 2 ----- ----- ----- ----- Net income available to common shareholders $230 $329 $797 $700 ===== ===== ===== ===== COMMON SHARES Basic: Weighted average common shares outstanding 217 227 216 228 ===== ===== ===== ===== Diluted: Weighted average common shares outstanding 217 227 216 228 Effect of dilutive securities: Stock options 4 2 2 2 Convertible preferred stock 6 7 7 7 Convertible monthly income preferred securities 3 7 6 7 Zero coupon convertible notes 2 2 2 2 ----- ----- ----- ----- Total 232 245 233 246 ===== ===== ===== ===== EARNINGS PER SHARE Basic $1.04 $1.43 $3.63 $3.01 ====== ====== ====== ====== Diluted $0.98 $1.34 $3.42 $2.84 ====== ====== ====== ====== EX-12 5 0005.txt Exhibit 12 THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES Computation of Ratios Three Months Ended Nine Months Ended September 30 September 30 ------------------ ----------------- 2000 1999 2000 1999 ------ ------ ------ ------ (In millions, except ratios) EARNINGS: Income from continuing operations before income taxes and cumulative effect of accounting change $331 $172 $1,170 $721 Add: fixed charges 46 56 133 135 ------ ------ ------ ------ Income, as adjusted $377 $228 $1,303 $856 ====== ====== ====== ====== FIXED CHARGES AND PREFERRED DIVIDENDS: Interest expense and amortization $32 $29 $88 $75 Dividends on preferred capital securities 8 9 26 28 Rental expense (1) 6 18 19 32 ------ ------ ------ ------ Total fixed charges 46 56 133 135 Preferred stock dividend requirements 4 4 11 12 ------ ------ ------ ------ Total fixed charges and preferred stock dividend requirements $50 $60 $144 $147 ====== ====== ====== ====== Ratio of earnings to fixed charges 8.13 4.07 9.79 6.35 ====== ====== ====== ====== Ratio of earnings to combined fixed charges and preferred stock dividend requirements 7.53 3.80 9.03 5.82 ====== ====== ====== ====== (1) Interest portion deemed implicit in total rent expense. EX-27 6 0006.txt
7 1,000,000 9-MOS 9-MOS DEC-31-2000 DEC-31-1999 SEP-30-2000 SEP-30-1999 20,198 19,610 0 0 0 0 1,634 1,359 414 603 893 930 27,184 26,496 81 171 316 157 1,085 921 41,657 38,883 23,883 22,594 3,567 3,148 0 0 0 0 1,636 1,316 337 477 50 26 2,211 2,085 4,786 4,338 41,657 38,883 4,287 3,948 1,215 1,176 526 173 361 330 3,181 3,073 1,041 1,023 997 810 1,170 721 359 168 811 553 (11) 173 0 0 0 (30) 800 696 3.63 3.01 3.42 2.84 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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