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 ======= ======= ======= =======