0000086312-01-500015.txt : 20011019
0000086312-01-500015.hdr.sgml : 20011019
ACCESSION NUMBER: 0000086312-01-500015
CONFORMED SUBMISSION TYPE: 8-K
PUBLIC DOCUMENT COUNT: 3
CONFORMED PERIOD OF REPORT: 20010928
ITEM INFORMATION: Acquisition or disposition of assets
ITEM INFORMATION: Other events
ITEM INFORMATION: Financial statements and exhibits
FILED AS OF DATE: 20011015
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: ST PAUL COMPANIES INC /MN/
CENTRAL INDEX KEY: 0000086312
STANDARD INDUSTRIAL CLASSIFICATION: FIRE, MARINE & CASUALTY INSURANCE [6331]
IRS NUMBER: 410518860
STATE OF INCORPORATION: MN
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 8-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-10898
FILM NUMBER: 1759207
BUSINESS ADDRESS:
STREET 1: 385 WASHINGTON ST
CITY: SAINT PAUL
STATE: MN
ZIP: 55102
BUSINESS PHONE: 6123107911
FORMER COMPANY:
FORMER CONFORMED NAME: SAINT PAUL COMPANIES INC
DATE OF NAME CHANGE: 19900730
FORMER COMPANY:
FORMER CONFORMED NAME: ST PAUL COMPANIES INC/MN/
DATE OF NAME CHANGE: 19990219
FORMER COMPANY:
FORMER CONFORMED NAME: ST PAUL FIRE & MARINE INSURANCE CO/MD
DATE OF NAME CHANGE: 19990219
8-K
1
eightk92801.txt
FORM 8-K SEPTEMBER 28, 2001
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
---------------------------
Date of Report (Date of earliest
event reported): September 28, 2001
THE ST. PAUL COMPANIES, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Minnesota 001-10898 41-0518860
------------------- -------------------- --------------------
(State of (Commission File (I.R.S. Employer
Incorporation) Number) Identification No.)
385 Washington St., St. Paul, MN 55102
-------------------------------- --------
(Address of principal (Zip Code)
executive offices)
(651) 310-7911
----------------------------------
(Registrant's telephone number,
including area code)
N/A
------------------------------------------------------------
(Former name or former address, if changed since last
report)
Item 2. Acquisition or Disposition of Assets.
------------------------------------
(a) On September 28, 2001, The St. Paul Companies' wholly-
owned subsidiary, St. Paul Fire and Marine Insurance
Company, completed the sale of Fidelity and Guaranty
Life Insurance Company (F&G Life), a life, annuity and
structured settlements company based in Baltimore,
Maryland, to Old Mutual plc, a London-based
international financial services company. Pursuant to
the terms of the stock purchase agreement between St.
Paul Fire and Marine Insurance Company and Old Mutual
plc related to this sale of F&G Life, Old Mutual plc
transferred 190,356,631 shares of Old Mutual plc
ordinary shares, valued at $300 million based on the
average closing price of Old Mutual plc shares on the
London Stock Exchange for the ten consecutive trading
days prior to September 27, 2001, $335 million in cash,
and approximately $4 million in interest, to St. Paul
Fire and Marine Insurance Company on September 28, 2001
in exchange for all the outstanding equity securities
of F&G Life. That purchase price was determined
through negotiations between St. Paul Fire and Marine
Insurance Company and Old Mutual plc, and their
respective investment bankers.
(b) Not applicable.
Item 5. Other Events.
------------
(a) On October 11, 2001, The St. Paul Companies, Inc.
announced that Jay S. Fishman, previously chairman and
chief executive officer of Travelers Insurance Group
Inc. and chief operating officer, finance and risk, of
Travelers' parent, Citigroup Inc., has been named to
succeed Douglas W. Leatherdale as chairman and chief
executive officer of The St. Paul, effective
immediately. Mr. Leatherdale will remain on The St.
Paul's board of directors until May 2002.
Item 7. Financial Statements and Exhibits.
---------------------------------
(a) Not applicable.
(b) Pro Forma Financial Information:
(i) The St. Paul Companies, Inc. Pro Forma Consolidated,
Condensed Balance Sheet as of June 30, 2001.
(ii) The St. Paul Companies, Inc. Pro Forma
Consolidated, Condensed Income Statement for the
six months ended June 30, 2001.
(iii) The St. Paul Companies, Inc. Pro Forma
Consolidated, Condensed Income Statement for the
year ended December 31, 2000 is incorporated herein
by reference to the "Life Insurance Segment"
section of "Note 12-Discontinued Operations" to the
consolidated financial statements included in The
St. Paul Companies, Inc. Quarterly Report on Form
10-Q for the quarter ended March 31, 2001, and
attached hereto as Exhibit 99(a).
Pro Forma Financial Information
The St. Paul Companies, Inc. and Subsidiaries
Pro Forma Consolidated, Condensed Balance Sheet
As of June 30, 2001
--------------------------------------------------------------
Restated
Previously Pro Forma for Sale
(In millions) Reported Adjustments of F&G Life
----------- ---------- ----------- -----------
Assets:
Fixed maturities $15,823 $ - $15,823
Other investments 5,202 300 (1) 5,502
------- ------- -------
Total investments 21,025 300 21,325
Cash 94 339 (2) 433
Reinsurance recoverable
on unpaid losses 5,121 - 5,121
Other assets 9,237 (657)(3) 8,580
------- ------- -------
Total assets 35,477 (18) 35,459
======= ======= =======
Liabilities:
Losses and loss
adjustment expense
reserves 18,411 - 18,411
Unearned premium
reserves 3,908 - 3,908
------- ------- -------
Total insurance
reserves 22,319 - 22,319
Other liabilities 6,289 48 (4) 6,337
------- ------- -------
Total liabilities 28,608 48 28,656
------- ------- -------
Shareholders'equity 6,869 (66)(5) 6,803
------- ------- -------
Total liabilities
and shareholders'
equity $35,477 ($18) $35,459
======= ======= =======
The pro forma adjustments to the pro forma consolidated
condensed balance sheet are as follows:
(1) Record fair value of Old Mutual plc ordinary shares
received in partial consideration for sale of F&G Life.
(2) Record $335 million cash proceeds received in partial
consideration for sale of F&G Life, and $4 million cash
proceeds received from repayment of intercompany interest
receivable.
(3) Record $606 million reduction in net assets of
discontinued operations to reflect sale of F&G Life, $50
million reduction in notes receivable to reflect repayment
of surplus note from F&G Life, and $1 million reduction in
accrued interest receivable to reflect the payment of
interest on the surplus note.
(4) Record accrued federal income tax expense of $36 million
and miscellaneous other expenses of $12 million associated
with the sale of F&G Life.
(5) Record impact on shareholders' equity of net loss
resulting from the sale of F&G Life.
Pro Forma Financial Information
The St. Paul Companies, Inc. and Subsidiaries
Pro Forma Consolidated, Condensed Income Statement
For the Six Months Ended June 30, 2001
----------------------------------------------------------------
Restated
Previously Pro Forma for Sale
(In millions, except share data) Reported Adjustments of F&G Life
---------- ----------- -----------
Revenues:
Premiums earned $3,371 $ - $3,371
Net investment income 635 - 635
Asset management 170 - 170
Realized investment gains 83 - 83
Other 71 - 71
------- ------- -------
Total revenues 4,330 - 4,330
------- ------- -------
Expenses:
Insurance losses and
loss adjustment expenses 2,529 - 2,529
Policy acquisition expenses 736 - 736
Operating and administrative
expenses 634 - 634
------- ------- -------
Total expenses 3,899 - 3,899
------- ------- -------
Income from continuing
operations before income
taxes 431 - 431
Income tax expense 126 - 126
------- ------- -------
Income from continuing
operations 305 - 305
Discontinued operations,
net of taxes 1 (66) (1) (65)
------- ------- -------
Net income $ 306 $(66) $ 240
======= ======= =======
Basic earnings per common
share:
Income from continuing
operations $ 1.37 $ - $ 1.37
Discontinued operations,
net of taxes 0.01 (0.31) $(0.30)
------- ------- -------
Net income $ 1.38 $(0.31) $ 1.07
======= ======= =======
Diluted earnings per common
share:
Income from continuing
operations $ 1.32 $ - $ 1.32
Discontinued operations,
net of taxes 0.01 (0.29) $(0.28)
------- ------- -------
Net income $ 1.33 $(0.29) $ 1.04
======= ======= =======
For purposes of calculating basic earnings per share, weighted
average shares outstanding totaled 215.3 million. For purposes
of calculating diluted earnings per share, weighted average
shares outstanding totaled 228.1 million.
The pro forma adjustment to the pro forma consolidated
condensed income statement is as follows:
(1) Record loss on disposal of F&G Life, net of taxes.
Comprised of $18 million pretax loss on proceeds, $12
million of pretax expenses associated with the disposal
(primarily underwriting fees and bonuses payable to F&G
Life executives), and $36 million of federal income tax
expense related to the sale.
(c) Exhibits:
Exhibit No. Exhibit
----------- -------
2(a) Stock Purchase Agreement between St. Paul
Fire and Marine Insurance Company and Old
Mutual plc related to the sale of F&G Life
(the "Agreement") is incorporated by
reference to Exhibit (2)(a) of The St. Paul
Companies, Inc. Quarterly Report on Form 10-Q
for the quarter ended March 31, 2001.
2(b) Letter Agreement between St. Paul Fire and
Marine Insurance Company, Old Mutual plc and
Old Mutual U.S. Life Holdings, Inc., dated as
of September 26, 2001, which amends the
Agreement.
99(a) "Life Insurance Segment" section of "Note 12
- Discontinued Operations" to the
consolidated financial statements included in
The St. Paul Companies, Inc. Quarterly Report
on Form 10-Q for the quarter ended March 31,
2001.
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
THE ST. PAUL COMPANIES, INC.
By /s/ Bruce A. Backberg
---------------------
Bruce A. Backberg
Senior Vice President
Date: October 15, 2001
EX-2
3
ex2b92801.txt
EXHIBIT 2
Exhibit 2(b)
ST. PAUL FIRE AND MARINE INSURANCE COMPANY
385 Washington Street, MC 517A
St. Paul, Minnesota 55102
September 26, 2001
OLD MUTUAL PLC
Lansdowne House
57 Berkeley Square
3rd Floor
London
W1J 6ER
United Kingdom
OLD MUTUAL U.S. LIFE HOLDINGS, INC.
12900 Metcalf, Suite 200
Overland Park, Kansas 66213
Dear Sirs:
This letter agreement amends the Stock Purchase
Agreement, dated as of April 26, 2001 (the "Stock Purchase
Agreement"), between you and us, as set forth herein.
Section 1.3(a)(i) of the Stock Purchase Agreement
is amended to read in full as follows:
"(i) Purchaser shall deliver $285,000,000 plus
accrued interest at the LIBOR rate from June 30, 2001
through to the next Business Day after the Escrow Closing
Date (or, if a Closing Date has been mutually agreed upon in
writing by Parent and Seller which is later than the next
Business Day after the Escrow Closing Date, through to such
later Closing Date) in immediately available funds (the
"Cash Consideration") to The Bank of New York (the "Escrow
Agent"), which shall be held and disbursed by the Escrow
Agent pursuant to the terms and conditions of this Agreement
and of the Escrow Agreement, dated as of September 26, 2001,
among St. Paul Fire and Marine Insurance Company, Old Mutual
plc and the Escrow Agent (the "Escrow Agreement"); and".
Section 1.3(b) of the Stock Purchase Agreement is
amended to read in full as follows:
"(b) Subject to the terms and conditions contained
herein, in consideration for the sale and delivery of the
Surplus Note, at the Escrow Closing, Note Purchaser shall
deliver $50,000,000 plus accrued interest on the Surplus
Note through to the next Business Day after the Escrow
Closing Date (or, if a Closing Date has been mutually agreed
upon in writing by Parent and Seller which is later than the
next Business Day after the Escrow Closing Date, through to
such later Closing Date), in immediately available funds
(the "Surplus Note Consideration") to the Escrow Agent,
which shall be held and disbursed by the Escrow Agent
pursuant to the terms and conditions of this Agreement and
of the Escrow Agreement."
Section 1.5(b) of the Stock Purchase Agreement is
amended to read in full as follows:
"(b) Parent (on behalf of Purchaser and Note
Purchaser), Purchaser and Note Purchaser, as appropriate,
will deliver to (i) the Escrow Agent (who shall hold such
cash sums in escrow pending Closing on the terms and subject
to the conditions set forth in the Escrow Agreement) the
Cash Consideration and the Surplus Note Consideration, and
(ii) Seller's Lawyers (who shall hold such documents in
escrow and, in the case of documents to be dated the Closing
Date, undated, to the order of Purchaser and Note Purchaser
pending Closing on the terms and subject to the conditions
set forth in the Lawyers' Escrow Instruction Letter) (A) a
share certificate or share certificates for the Initial
Parent Shares in the name of Seller or such affiliate or
affiliates of Seller as Seller may direct and accompanied by
any requisite transfer tax stamps, (B) the certificate
referred to in Section 8.3.7 of this Agreement, (C) the
Indemnification Agreement duly executed and delivered by
Parent, (D) the License Agreement, duly executed and
delivered by Parent, and (E) such other documents and
instruments required to be delivered by Parent under the
terms of this Agreement."
Section 1.7(b) of the Stock Purchase Agreement is
amended to read in full as follows:
"(b) (i) The Escrow Agent shall transfer the Cash
Consideration and Surplus Note Consideration to such bank
account as Seller may direct; and
(ii) Seller's Lawyers shall date and release to
Seller all of the documents and instruments referred to in
Section 1.5(b)(ii) above."
The reference to "Escrow Account" set forth in
Section 2.1(b) of the Stock Purchase Agreement shall be
deemed to be deleted.
Notwithstanding Sections 1.8(c) and 1.8(d) of the
Stock Purchase Agreement, each of the Parent and Seller
agree (x) to endeavor to mutually agree upon an amount, if
any, that shall constitute the Impaired Security Purchase
Price Adjustment for purposes of Section 1.8(a) of the Stock
Purchase Agreement within 20 days following the Closing
Date, and (y) that the Valuation Expert shall not be
required to be engaged until the date that is 21 days after
the Closing Date, provided that no Valuation Expert shall be
required to be engaged if Parent and Seller reach the mutual
agreement within the 20-day period referenced in clause (x)
above. The reference in the first sentence of Section
1.8(f) of the Stock Purchase Agreement to "final
determination of any adjustment pursuant to this Section
1.8" shall be deemed to mean final determination of any
adjustment pursuant to Section 1.8 of the Stock Purchase
Agreement or the date upon which Parent and Seller reach the
mutual agreement referenced in clause (x) above, as the case
may be. In the event that Parent and Seller do not reach
the mutual agreement within the 20-day period referenced in
clause (x) above, the reference to "Escrow Closing Date" in
the second sentence of Section 1.8(c) of the Stock Purchase
Agreement and to "Closing Date" in the second sentence of
Section 1.8(d) of the Stock Purchase Agreement shall be
deemed to mean the date that is 21 days after the Closing
Date.
Except as amended hereby, the Stock Purchase
Agreement shall remain in full force and effect.
This letter agreement may be executed in one or
more counterparts, each of which when executed shall be
deemed to be an original and all of which taken together
shall constitute one and the same agreement.
THIS LETTER AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
If the foregoing is acceptable to you, please execute a
copy of this letter agreement in the space below, at which
time this instrument will constitute a binding agreement
between us with effect as of the date first above written.
Very truly yours,
ST. PAUL FIRE AND MARINE
INSURANCE COMPANY
By: /s/ Bruce A. Backberg
-----------------
Name: Bruce A. Backberg
Title: Senior Vice President and
Corporate Secretary
ACCEPTED AND AGREED BY
OLD MUTUAL PLC
By: /s/ M.C. Murray
-----------
Name: M.C. Murray
Title: Corporate Group Secretary
OLD MUTUAL U.S. LIFE HOLDINGS, INC.
By: /s/ Guy Barker
-----------
Name: Guy Barker
Title: President
By: /s/ Guy Barker
----------
Name: Guy Barker
Title: President
EX-99
4
ex9992801.txt
EXHIBIT 99
Exhibit 99(a)
Note 12 - Discontinued Operations
----------------------------------
Life Insurance Segment
----------------------
On April 26, 2001, we announced an agreement by our
subsidiary, St. Paul Fire and Marine Insurance Company
("Fire and Marine"), to sell its life insurance company,
Fidelity and Guaranty Life Insurance Company, and its
subsidiary, Thomas Jefferson Life, (together, "F&G Life") to
Old Mutual plc ("Old Mutual") for $335 million in cash and
$300 million in shares of Old Mutual stock. The
consideration is subject to possible adjustment related to
F&G Life's investment portfolio. If the market value of
specified securities within that portfolio changes between
March 31, 2001 and the closing date, or if any securities
within that portfolio experience specified credit rating
downgrades prior to closing, the consideration is subject to
adjustment. Pursuant to the purchase agreement, The St.
Paul, or any direct or indirect wholly owned subsidiary of
The St. Paul, must hold the Old Mutual stock received for
one year after the closing of the transaction. The
consideration is also subject to possible additional
adjustment based on the market price of Old Mutual's stock
at the end of that one-year period, as described in greater
detail in the purchase agreement. The sale is subject to
regulatory approvals and other conditions, and is expected
to close later in 2001. We expect to realize a modest gain
on the sale of F&G Life, the exact amount of which will be
determined at closing.
The measurement date for the sale of F&G Life occurred prior
to the filing of this Quarterly Report on Form 10-Q; as a
result, our consolidated statements of income presented
herein reflect F&G Life's results of operations in
discontinued operations for the three months ended March 31,
2001 and 2000. In the first quarter of 2001, F&G Life
recorded a net loss of $424,000, which was driven by after-
tax realized investment losses of $15 million. Those losses
were primarily the result of writedowns in the carrying
value of certain fixed maturity investments. In the first
quarter of 2000, F&G Life recorded net income of $13
million. In addition, on our consolidated balance sheet as
of March 31, 2001, F&G Life's net assets of $626 million
were included in "Other Assets," classified as net assets of
discontinued operations.
Presented on the following pages are The St. Paul's pro
forma consolidated, condensed income statement for the year
ended Dec. 31, 2000, which assumes the sale of F&G Life
occurred at the beginning of 2000, and The St. Paul's
restated consolidated balance sheet as of Dec. 31, 2000.
Included are condensed historical statements as reported
before the sale of F&G Life, pro forma adjustments, and the
pro forma statements after the sale. 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 sale of the life insurance segment
had been consummated at the beginning of 2000, or that may
be obtained in the future.
Statements of Income
Twelve Months Ended Dec. 31, 2000
---------------------------------
Restated
Previously for sale of
(In millions, except share data) Reported F&G Life F&G Life
------------------------------ ---------- -------- -----------
Revenues:
Premiums earned $5,898 $306 $5,592
Net investment income 1,616 354 1,262
Asset management 356 - 356
Realized investment gains (losses) 607 (25) 632
Other 146 1 145
------ ------ ------
Total revenues 8,623 636 7,987
------ ------ ------
Expenses:
Insurance losses and loss
adjustment expenses 3,913 - 3,913
Life policy benefits 494 494 -
Policy acquisition expenses 1,442 46 1,396
Operating and administrative expenses 1,320 43 1,277
------ ------ ------
Total expenses 7,169 583 6,586
------ ------ ------
Income from continuing operations
before income taxes 1,454 53 1,401
Income tax expense 441 10 431
------ ------ ------
Income from continuing operations 1,013 43 970
Discontinued operations, net of taxes (20) (43) 23
------ ------ ------
Net income $ 993 $ - $ 993
====== ====== ======
Basic earnings per common share:
Income from continuing operations $4.59 $0.20 $4.39
Discontinued operations, net of taxes (0.09) (0.20) $0.11
------ ------ ------
Net income $4.50 $ - $4.50
====== ====== ======
Diluted earnings per common share:
Income from continuing operations $4.32 $0.18 $4.14
Discontinued operations, net of taxes (0.08) (0.18) $0.10
------ ------ ------
Net income $4.24 $ - $4.24
====== ====== ======
For purposes of calculating basic earnings per share,
weighted average shares outstanding totaled 216.7 million.
For purposes of calculating diluted earnings per share,
weighted average shares outstanding totaled 232.9 million.
Balance Sheet
As of December 31, 2000
-------------------------------------------------------
Net Assets Restated
Previously of Discontinued for Sale of
(In millions) Reported F&G Life Operations F&G Life
----------- ----------- --------- --------------- ------------
Assets:
Fixed maturities $20,470 $ 4,533 $ - $15,937
Other investments 6,629 514 - 6,115
------- ------- ------- -------
Total investments 27,099 5,047 - 22,052
Reinsurance
recoverable on
unpaid losses 5,196 545 - 4,651
Other assets 8,910 698 587 8,799
------- ------- ------- -------
Total assets $41,205 $6,290 $587 $35,502
======= ======= ======= =======
Liabilities:
Losses and loss
adjustment expense
reserves 18,196 - - 18,196
Future policy
benefits 5,460 5,460 - -
Unearned premium
reserves 3,648 - - 3,648
------- ------- ------- -------
Total insurance
reserves 27,304 5,460 - 21,844
Other liabilities 6,674 243 - 6,431
------- ------- ------- -------
Total liabilities 33,978 5,703 - 28,275
------- ------- ------- -------
Shareholders' equity 7,227 587 587 7,227
------- ------- ------- -------
Total liabilities and
shareholders' equity $41,205 $6,290 $587 $35,502
======= ======= ======= =======