-----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, RRYfyGUeTgzMfMcW6bU/kWFxQPXe+PdPZUax+yI87dGdzaxN0/g7Qy2s1aAdAR9u bHt/XKt9HP4F8GaAX3mxYA== 0000086312-04-000063.txt : 20040628 0000086312-04-000063.hdr.sgml : 20040628 20040628152346 ACCESSION NUMBER: 0000086312-04-000063 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040628 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ST PAUL TRAVELERS COMPANIES INC 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: 11-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10898 FILM NUMBER: 04884711 BUSINESS ADDRESS: STREET 1: 385 WASHINGTON ST CITY: SAINT PAUL STATE: MN ZIP: 55102 BUSINESS PHONE: 6123107911 FORMER COMPANY: FORMER CONFORMED NAME: ST PAUL FIRE & MARINE INSURANCE CO/MD DATE OF NAME CHANGE: 19990219 FORMER COMPANY: FORMER CONFORMED NAME: ST PAUL COMPANIES INC/MN/ DATE OF NAME CHANGE: 19990219 FORMER COMPANY: FORMER CONFORMED NAME: ST PAUL COMPANIES INC /MN/ DATE OF NAME CHANGE: 19920703 11-K 1 elevk1203.txt FORM 11-K FOR THE YEAR ENDED DECEMBER 31, 2003 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------- FORM 11-K X Annual Report Pursuant to Section 15(d) of the --- Securities Exchange Act of 1934 (Fee Required) or Transition Report Pursuant to Section 15(d) of --- the Securities Exchange Act of 1934(no fee required) for the transition period from to . --------- ---------- For the fiscal year ended December 31, 2003 Commission file number 001-10898 --------------------------------- THE ST. PAUL COMPANIES, INC. STOCK OWNERSHIP PLAN THE ST. PAUL COMPANIES, INC. 385 WASHINGTON STREET ST. PAUL MINNESOTA 55102 (Full title of the Plan and address of the Plan) ------------------------------ THE ST. PAUL COMPANIES, INC. 385 WASHINGTON STREET ST. PAUL, MINNESOTA 55102 (Name and address of principal executive offices of the issuer of the securities) ------------------------------- REQUIRED INFORMATION -------------------- The St. Paul Companies, Inc. Stock Ownership Plan (the "Plan") is subject to the provisions of the Employee Retirement Income Securities Act of 1974, as amended ("ERISA"), and for purposes of satisfying the requirements of Form 11-K has included for filing herewith the Plan financial statements and schedule prepared in accordance with the financial reporting requirements of ERISA. Financial Statements and Schedule Page - --------------------------------- ---- Stock Ownership Plan: Independent Auditors' Report for Stock Ownership Plan . 17 Statements of Net Assets Available for Benefits under Stock Ownership Plan . . . . . . . . . . . . . . 18-19 Statements of Changes in Net Assets Available for Benefits under Stock Ownership Plan . . . . . . . . . . 20-21 Notes to Financial Statements for Stock Ownership Plan . . 22-30 Schedule H, Line 4i-Schedule of Assets (Held at End of Year) for Stock Ownership Plan . . . . . 31 Schedule H, Line 4j-Schedule of Reportable Transactions for Stock Ownership Plan . . . . . . . . . . . . . . . . 32 Signature for Stock Ownership Plan . . . . . . . . . . . . 33 Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . 34 Report of Independent Registered Public Accounting Firm ------------------------------------------------------- The Plan Administrative Committee and Plan Participants The St. Paul Companies, Inc. Stock Ownership Plan: We have audited the accompanying statements of net assets available for benefits of The St. Paul Companies, Inc. Stock Ownership Plan (the Plan) as of December 31, 2003 and 2002, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan's administrator. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of The St. Paul Companies, Inc. Stock Ownership Plan as of December 31, 2003 and 2002, and the changes in the net assets available for benefits for the years then ended in conformity with U.S. generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets (held at end of year) and reportable transactions are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan's administrator. The supplemental schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. KPMG LLP -------- KPMG LLP Minneapolis, Minnesota June 25, 2004 THE ST. PAUL COMPANIES, INC. STOCK OWNERSHIP PLAN Statement of Net Assets Available for Benefits December 31, 2003 Allocated ------------------------------- Assets: Non-Participant Participant Directed Directed Unallocated Total --------------- ----------- ----------- ------------ Investments: - ----------- Preferred stock of The St. Paul Companies, Inc. $192,198,139 $ - $24,443,556 $216,641,695 Common stock of The St. Paul Companies, Inc. 166,992,795 66,308,123 - 233,300,918 Cash and short-term investments 1,726,807 612,355 2,015,987 4,355,149 ----------- ---------- ---------- ----------- Total investments 360,917,741 66,920,478 26,459,543 454,297,762 Receivables: - ----------- Participating companies' contributions - - 5,443,145 5,443,145 Accrued dividends and interest 1,224,643 484,977 1,712 1,711,332 Investments sold but not delivered 194,332 - - 194,332 ----------- ---------- ---------- ----------- Total receivables 1,418,975 484,977 5,444,857 7,348,809 ----------- ---------- ---------- ----------- Total assets 362,336,716 67,405,455 31,904,400 461,646,571 ----------- ---------- ---------- ----------- Liabilities: - ----------- Long-term debt - - 22,664,215 22,664,215 Accrued expenses 65,745 - 887,682 953,427 Other payable 8,124 490,517 - 498,641 ----------- ---------- ---------- ----------- Total liabilities 73,869 490,517 23,551,897 24,116,283 ----------- ---------- ---------- ----------- Net assets available for benefits $362,262,847 $66,914,938 $8,352,503 $437,530,288 =========== ========== ========== =========== See accompanying notes to financial statements. THE ST. PAUL COMPANIES, INC. STOCK OWNERSHIP PLAN Statement of Net Assets Available for Benefits December 31, 2002 Allocated ------------------------------- Assets: Non-Participant Participant Directed Directed Unallocated Total --------------- ----------- ----------- ------------ Investments: - ----------- Preferred stock of The St. Paul Companies, Inc. $154,061,804 $ - $47,288,353 $201,350,157 Common stock of The St. Paul Companies, Inc. 161,439,222 60,341,605 - 221,780,827 Cash and short-term investments 1,910,368 450,544 2,174,782 4,535,694 ----------- ---------- ---------- ----------- Total investments 317,411,394 60,792,149 49,463,135 427,666,678 Receivables: - ----------- Participating companies' contributions - - 5,337,124 5,337,124 Accrued dividends and interest 1,380,539 515,286 2,490 1,898,315 Other receivable 400,037 - - 400,037 ----------- --------- ---------- ----------- Total receivables 1,780,576 515,286 5,339,614 7,635,476 ----------- ---------- ---------- ----------- Total assets 319,191,970 61,307,435 54,802,749 435,302,154 ----------- ---------- ---------- ----------- Liabilities: - ----------- Long-term debt - - 40,469,582 40,469,582 Accrued expenses 69,365 - 1,585,058 1,654,423 Other payable 48,287 366,213 - 414,500 ----------- ---------- ---------- ----------- Total liabilities 117,652 366,213 42,054,640 42,538,505 ----------- ---------- ---------- ----------- Net assets available for benefits $319,074,318 $ 60,941,222 $12,748,109 $392,763,649 =========== =========== ========== =========== See accompanying notes to financial statements. THE ST. PAUL COMPANIES, INC. STOCK OWNERSHIP PLAN Statement of Changes in Net Assets Available for Benefits Year Ended December 31, 2003 Allocated ---------------------------- Non-Participant Participant Directed Directed Unallocated Total --------------- ----------- ----------- ------------ Additions: - --------------------- Investment income: Dividends $11,709,760 $1,976,580 $1,677,529 $15,363,869 Interest 23,293 7,297 14,731 45,321 Net appreciation in market value of investments 48,681,351 9,687,310 5,688,294 64,056,955 ----------- ---------- ---------- ----------- Net investment income 60,414,404 11,671,187 7,380,554 79,466,145 Participating companies' contributions - - 12,896,541 12,896,541 Transfer from St. Paul Companies, Inc Savings Plus Plan - 16,954,672 - 16,954,672 ----------- ---------- ---------- ----------- Total additions 60,414,404 28,625,859 20,277,095 109,317,358 ----------- ---------- ---------- ----------- Deductions: - ---------- Interest expense - - 2,742,647 2,742,647 Administrative expenses 241,215 - - 241,215 Other expense 690 2,130 - 2,820 Paid to participants in cash 25,575,444 2,650,988 - 28,226,432 Common stock distributed at market value 8,187,603 1,457,092 - 9,644,695 Transfer to St. Paul Companies, Inc. Savings Plus Plan 5,150,977 18,541,933 - 23,692,910 ----------- ---------- ---------- ----------- Total deductions 39,155,929 22,652,143 2,742,647 64,550,719 ----------- ---------- ---------- ----------- Net increase prior to interfund transfers 21,258,475 5,973,716 17,534,448 44,766,639 Interfund transfers: - ------------------- Allocation of 95,246 shares of preferred stock, at market 28,533,091 - (28,533,091) - Transfer of dividend income for debt service (6,603,037) - 6,603,037 - ------------ --------- ---------- ----------- Net increase (decrease) 43,188,529 5,973,716 (4,395,606) 44,766,639 Net assets available for benefits: Beginning of year 319,074,318 60,941,222 12,748,109 392,763,649 ----------- ---------- ---------- ------------ End of year $362,262,847 $66,914,938 $ 8,352,503 $437,530,288 =========== ========== ========== ============ See accompanying notes to financial statements. THE ST. PAUL COMPANIES, INC. STOCK OWNERSHIP PLAN Statement of Changes in Net Assets Available for Benefits Year Ended December 31, 2002 Allocated ---------------------------- Non-Participant Participant Directed Directed Unallocated Total --------------- ----------- ----------- ------------ Additions (reductions): - --------------------- Investment income (loss): Dividends $ 11,794,868 $ 2,016,588 $ 2,707,940 $16,519,396 Interest 46,084 15,894 25,313 87,291 Net depreciation in in market value of investments (88,630,403) (18,757,739) (19,575,570) (126,963,712) ------------ ---------- ---------- ----------- Net investment loss (76,789,451) (16,725,257) (16,842,317) (110,357,025) Participating companies' contributions - - 11,190,849 11,190,849 Other income 2,276 - - 2,276 Transfer from St. Paul Companies, Inc. Savings Plus Plan - 81,817,119 - 81,817,119 ----------- ---------- ---------- ----------- Total additions (reductions) (76,787,175) 65,091,862 (5,651,468) (17,346,781) ----------- ---------- ---------- ----------- Deductions: - ---------- Interest expense - - 4,283,118 4,283,118 Administrative expenses 205,655 - - 205,655 Other expense - 6,977 - 6,977 Paid to participants in cash 24,697,001 2,808,812 - 27,505,813 Common stock distributed at market value 9,636,369 1,393,511 - 11,029,880 Transfer to St. Paul Companies, Inc. Savings Plus Plan 781,388 1,912,259 - 2,693,647 ----------- ---------- ---------- ----------- Total deductions 35,320,413 6,121,559 4,283,118 45,725,090 ----------- ---------- ---------- ----------- Net increase (decrease) prior to interfund transfers (112,107,588) 58,970,303 (9,934,586) (63,071,871) Interfund transfers: - ------------------- Allocation of 82,383 shares of preferred stock, at market 23,277,838 - (23,277,838) - Transfer of dividend income for debt service (6,132,360) - 6,132,360 - ----------- ---------- ---------- ----------- Net increase (decrease) (94,962,110) 58,970,303 (27,080,064) (63,071,871) Net assets available for benefits: Beginning of year 414,036,428 1,970,919 39,828,173 455,835,520 ----------- ---------- ---------- ----------- End of year $319,074,318 $60,941,222 $12,748,109 $392,763,649 =========== ========== ========== =========== See accompanying notes to financial statements. THE ST. PAUL COMPANIES, INC. STOCK OWNERSHIP PLAN Notes to Financial Statements December 31, 2003 and 2002 Note 1 Description of the Plan ----------------------- General Provisions ------------------ The following brief description of the St. Paul Companies, Inc. Stock Ownership Plan (the Plan) is provided for general information purposes. Plan participants should refer to the Plan document for more complete information. Effective January 1, 1998, The St. Paul Companies, Inc. Savings Plus Preferred Stock Plan (PSOP) and The St. Paul Companies, Inc. Employee Stock Ownership Plan (ESOP) were merged into one plan, thereby creating the Plan. The Plan is a defined contribution plan under which guaranteed matching contributions are made, with respect to employees' pretax 401(k) contributions to The St. Paul Companies, Inc. Savings Plus Plan (Savings Plus Plan). The St. Paul Companies, Inc. (The Company) and certain of its subsidiaries, St. Paul Fire and Marine Insurance Company and St. Paul Reinsurance Management Corporation currently participate in the Plan. Octagon Risk Services, Inc. withdrew from the Plan effective October 5, 2003,pursuant to its sale by the Company. U.S. Bank National Association is the Trustee for the ESOP Common Stock Fund portion of The St. Paul Companies, Inc. Stock Ownership Trust (Trust). Fidelity Management Trust Company (FMTC) is the Trustee for the remaining portion of the Trust. The Company has appointed an Administrative Committee which acts as Plan Administrator. THE ST. PAUL COMPANIES, INC. STOCK OWNERSHIP PLAN Notes to Financial Statements December 31, 2003 and 2002 Note 1 Description of the Plan (continued) ---------------------------------- Participation, Vesting and Allocations -------------------------------------- Employees of the Company and participating subsidiaries, who participated in the ESOP or PSOP on December 31, 1997 became Plan participants on January 1, 1998. Employees of the Company and participating subsidiaries, who were not participants in the ESOP or PSOP on December 31, 1997 become participants as of the later of January 1, 1998 or their employment date. Participants are fully vested in their pre-1999 matching, performance-based and ESOP allocations after six years of service. Participants become 20 percent vested in these allocations of Company stock after two years of service increasing an additional 20 percent for each additional year of service. Participants are immediately vested in their 1999-2002 matching allocations. Beginning January 1, 2003, participants are fully vested after three years of service. Participants also become fully vested in full upon retirement, permanent and total disability, death, or upon termination of the Plan or a change in control of the Company, as defined by the Plan. The Plan allocates shares of the Company's Series B Convertible Preferred Stock (preferred stock) to those employees participating in the Savings Plus Plan. Shares of the Company's preferred stock are allocated to eligible participants semi-annually based on their Savings Plus Plan contributions through June 30 and December 31. Effective January 1, 2003, the Company increased the matching contribution of one dollar for every dollar of participant salary conversion contribution from four to six percent of their base salary. This matching contribution made in the form of The St. Paul Companies, Inc. Preferred Stock is subject to a three-year cliff vesting provision. Except for cases of retirement, permanent and total disability, or death, this matching allocation is made only to participants actively employed on the last working day of June or December, respectively. Over a period of ten years, shares of the Company's common stock were allocated, from the former ESOP, to participants based on compensation. The final ESOP allocation was made as of December 31, 1997. Except for cases of death, retirement or permanent and total disability, the allocation was made only to participants actively employed on the last working day of the calendar year. THE ST. PAUL COMPANIES, INC. STOCK OWNERSHIP PLAN Notes to Financial Statements December 31, 2003 and 2002 Note 1 Description of the Plan (continued) ---------------------------------- Voting Rights ------------- Each participant is entitled to exercise voting rights attributable to the shares allocated to his or her account and is notified by the Trustee prior to the time that such rights are to be exercised. The Trustee is not permitted to vote any allocated share for which instructions have not been given by a participant. The Trustee is required, however, to vote any unallocated shares on behalf of the collective best interest of the plan participants and beneficiaries. Long Term Debt -------------- Prior to the merger that created the Plan, the PSOP had obtained long-term financing from St. Paul Fire and Marine Insurance Company to purchase Company preferred stock for future allocation to PSOP participants. This loan principal and interest continues to repaid by the Plan using participating Company contributions and dividends received on allocated and unallocated shares of Company preferred stock held by the Trust. See Note 7 for more information. Distribution of Benefits ------------------------ Distribution of vested benefits from the Trust is made upon a participant's retirement, permanent and total disability, death or employment termination. Distribution of vested benefits from the Preferred Stock or ESOP Common Stock Funds, at the participant's election, will be either in the form of cash, or full shares of Company common stock and cash in lieu of any fractional shares of such stock. ESOP Common Stock Fund dividends are distributed to participants as soon as practicable following the dividend pay date. As of October 2003 participants are able to reinvest dividends in the Plan if they so choose. Diversification --------------- Participants do not have investment discretion regarding the Preferred Stock Fund. Participants who have attained age 55 may elect to diversify a portion of their Preferred Stock balance, once a year for six years, up to a maximum amount. Diversifications are made through transfers out of the Plan for investment in The St. Paul Companies, Inc. Savings Plus Plan. Beginning in 2003, a participant who has an ESOP account in the Plan has the ability to move money out of the ESOP account into other investment options. ESOP diversification was phased in during 2003 according to the following schedule: February 1, 2003 Up to 25% of ESOP shares can be diversified April 1, 2003 Up to 50% of original ESOP shares can be diversified June 1, 2003 Up to 75% of original ESOP shares can be diversified August 1, 2003 Full ESOP balance can be diversified Diversifications are made through transfers out of the Plan for investment in The St. Paul Companies, Inc. Savings Plus Plan. Forfeitures ----------- Under the Plan, forfeitures are used in the following priority: - to restore benefits to participants returning to the Plan; - to make any necessary corrective allocations or distributions to participants; - to pay administrative expenses, and; - any remaining forfeitures are reallocated to participants as described in the Plan. Under those terms the Company plans to utilize a portion of these forfeitures to reduce future employer contributions. Forfeited non-vested accounts totaled $5.4 million and $3.2 million at December 31, 2003 and 2002, respectively. Forfeitures used to reduce employer contributions totaled $1.6 million in 2003 and zero in 2002, respectively. THE ST. PAUL COMPANIES, INC. STOCK OWNERSHIP PLAN Notes to Financial Statements December 31, 2003 and 2002 Note 1 Description of the Plan (continued) ---------------------------------- Plan Termination ---------------- Although the Company expects to continue the Plan indefinitely, it has reserved the right to terminate the Plan at any time. Upon such termination, the Plan Administrative Committee would consider directing the Trustee to distribute participant account balances. Upon termination of the Plan participant account balances would vest in full. Tax Status ---------- The Internal Revenue Service has determined and informed the Company by letter dated December 31, 2003, that the Plan as designed is in accordance with applicable Section 401- 1(b)(3) and the Trust is qualified under Section 501(a) of the Internal Revenue Code. Note 2 Significant Accounting Policies ------------------------------- The accompanying Plan financial statements are prepared in conformity with United States generally accepted accounting principles (GAAP). The preparation of these financial statements requires management to rely on estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. We continually review our estimates and make adjustments as necessary, but actual results could turn out to be significantly different from what we expected when we made these estimates. The Plan provides for investment in St. Paul Preferred and Common Stock funds. Investments in general are exposed to various risks, such as interest rate, credit and overall market volatility. Due to the level of risk associated with investments, it is reasonably possible that changes in the values of investments will occur in the near term and that such changes could materially affect participants' account balances and the amounts reported in the statements of net assets available for benefits. The investment in preferred and common stock of the Comapany are carried at market value as discussed in Note 8. THE ST. PAUL COMPANIES, INC. STOCK OWNERSHIP PLAN Notes to Financial Statements December 31, 2003 and 2002 Note 2 Significant Accounting Policies (continued) ------------------------------------------ Realized gains or losses on the sales of investments and the change in unrealized appreciation or depreciation in the market value of investments are presented in total in the statements of changes in net assets available for plan benefits. The average cost method is used to determine cost of shares sold or distributed. Purchases and sales of investments are recorded on a trade-date basis. Dividends are recorded on the ex-dividend date. Interest is recorded when earned. Money market portfolios and short-term investments are carried at cost plus accrued interest or amortized discount, which approximates market value. A portion of administrative expenses of the Plan are paid by the participating companies and are not reflected in the accompanying financial statements. Plan administrative expenses paid by the Plan are paid out of forfeitures. Benefits are recorded when paid. Note 3 Investment in Preferred Stock of the Company -------------------------------------------- Information regarding the Plan's investment in preferred stock of the Company follows: Allocated Unallocated Total ---------- ----------- -------- December 31, 2003 ----------------- Number of shares 601,164 76,455 677,619 Cost $86,747,964 $11,032,514 $97,780,478 Market value $192,198,139 $24,443,556 $216,641,695 Market value per share $319.71 December 31, 2002 ----------------- Number of shares 559,391 171,701 731,092 Cost $80,720,084 $24,776,549 $105,496,633 Market value $154,061,804 $47,288,353 $201,350,157 Market value per share $275.41 Each share of the Company's preferred stock has a guaranteed minimum value of $144.30, a dividend rate of $11.724 annually and is convertible into eight shares of the Company's common stock. THE ST. PAUL COMPANIES, INC. STOCK OWNERSHIP PLAN Notes to Financial Statements December 31, 2003 and 2002 Note 4 Investment in Common Stock of the Company ----------------------------------------- Information regarding the Plan's investment in common stock of the Company follows. All shares are considered allocated. Total December 31, 2003 ------------ ----------------- Number of shares 5,884,008 Cost $102,152,889 Market value $233,300,918 Percent of total Company shares outstanding 2.6% Market value per share $39.65 December 31, 2002 ----------------- Number of shares 6,513,387 Cost $109,415,823 Market value $221,780,827 Percent of total Company shares outstanding 2.9% Market value per share $34.05 Note 5 Net Appreciation (Depreciation) in Market Value of Investments -------------------------------------------------------------- Plan investments, including gains and losses on investments bought and sold as well as held during the year, appreciated (depreciated) as follows: December 31, 2003 December 31, 2002 ----------------- ----------------- Preferred Stocks $ 30,531,658 $ (59,843,734) Common Stocks 33,525,297 (67,134,258) Mutual Funds - 13,216 Common Trust Fund - 1,064 ------------ ------------ Net Appreciation (Depreciation) $ 64,056,955 $(126,963,712) ============ ============ THE ST. PAUL COMPANIES, INC. STOCK OWNERSHIP PLAN Notes to Financial Statements December 31, 2003 and 2002 Note 6 Party-in-Interest Transactions ------------------------------ Transactions resulting in Plan assets being transferred to or used by a related party are prohibited under the Employee Retirement Income Security Act of 1974 (ERISA) unless a specific exemption applied. U.S. Bank National Association (U.S. Bank) and Fidelity Management Trust Company (FMTC), are parties-in-interest as defined by ERISA as a result of being trustees of the Plan. U.S. Bank and FMTC are investing plan assets in their respective short- term investment fund. Certain Plan investments were in shares of mutual funds or a commingled pool managed by Fidelity Investments. The Plan also engages in transactions involving the acquisition or disposition of units of participation in preferred and common stock of The St. Paul Companies, Inc., a party-in-interest with respect to the Plan. These transactions are covered by an exemption from the "prohibited transactions" provisions of ERISA and the Internal Revenue Code. Note 7 Long Term Debt -------------- To finance the preferred stock purchase for future allocation to qualified employees, the Trust (formerly the PSOP) borrowed $150 million from St. Paul Fire and Marine Insurance Company, at an interest rate of 9.4 percent. This long-term debt matures on January 31, 2005, and requires semiannual interest payments. Payments of principal will be made in order to provide the targeted benefits of the Plan. Any remaining unpaid balance is due on maturity date. Each participating company's cash contribution to the Trust is based on its percentage of the total Company match and performance-based allocation. When these loan payments are made, a pro rata amount of preferred stock is allocated from unallocated shares to Participants' Plan accounts. These allocations are characterized as either matching contributions, performance-based contributions or as dividends on participants' allocated preferred shares. Repayment of this loan is guaranteed by the Company. The outstanding balance of this debt was $22,664,215 and $40,469,582, as of December 31, 2003 and 2002, respectively. Future maturities of long-term debt are as follows: Year ending December 31 ----------------------- 2004 $ 8,373,088 2005 14,291,127 ---------- $22,664,215 ========== PAGE> THE ST. PAUL COMPANIES, INC. STOCK OWNERSHIP PLAN Notes to Financial Statements December 31, 2003 and 2002 Note 8 Disclosures About Fair Value of Financial Instruments ----------------------------------------------------- The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value. Cash and Short-term Investments are carried at cost plus accrued interest or amortized discount, which approximates the fair value. Preferred stock is based on a valuation model provided by an independent appraiser. Common stock of The Company is based on published market prices. The fair values of the Plan's long-term debt is based primarily on the fair value of debt securities in the market that have terms similar to the Plan's debt. The carrying amounts and estimated fair values of the Plan's financial instruments at December 31 are as follows: 2003 2002 ------------------------ ----------------------- Carrying Fair Carrying Fair Amount Value Amount Value --------- ------- --------- ------ Cash and short-term investments $ 4,355,149 $ 4,355,149 $ 4,535,694 $ 4,535,694 Preferred stock of The St. Paul Companies, Inc. 216,641,695 216,641,695 201,350,157 201,350,157 Common stock of The St. Paul Companies, Inc. 233,300,918 233,300,918 221,780,827 221,780,827 ----------- ----------- ----------- ----------- Total Investments $454,297,762 $454,297,762 $427,666,678 $427,666,678 =========== =========== =========== =========== Long-term debt $ 22,664,215 $ 24,226,913 $ 40,469,582 $ 45,466,361 =========== =========== =========== =========== THE ST. PAUL COMPANIES, INC. STOCK OWNERSHIP PLAN Notes to Financial Statements December 31, 2003 and 2002 Note 9 Subsequent Event ---------------- On November 17, 2003, the Company announced the proposed business combination with Travelers Property Casualty Corporation an closing took place on April 1, 2004. The name of the registrant was changed from "The St. Paul Companies, Inc." to "The St. Paul Travelers Companies, Inc." in connection with the merger and St. Paul Travelers Common and Series B Convertible Preferred Stock was issued. This business combination is considered a change-in-control for the Plan therefore all company contributions allocated to active participants before April 1, 2004 became full vested. Company contributions allocated to participants after April 1, 2004 vest after three years of service. The Plan, St. Paul Companies, Inc. Savings Plus Plan and Travelers 401(k) Savings Plans are expected to merge into one plan on or near January 1, 2005. SCHEDULE 1 THE ST. PAUL COMPANIES, INC. STOCK OWNERSHIP PLAN Schedule H, Line 4i - Schedule of Assets (Held at End of Year) December 31, 2003 Identity of Issue Description of Investment Cost Current Value - ----------------- ------------------------- ---------- ------------- *The St. Paul Series B Convertible Companies, Inc. Preferred Stock, no par value, 677,619 shares $ 97,780,478 $ 216,641,695 *The St. Paul Common stock, no par Companies, Inc. value, 5,884,008 shares 102,152,889 233,300,918 *U.S. Bank N.A. First American Prime Obligation, Class Y Institutional Fund 633,558 633,558 *Fidelity Management Institutional Cash Trust Company Portfolio MM Fund shares 3,721,591 3,721,591 ----------- ----------- Total Investments $ 204,288,516 $ 454,297,762 =========== =========== * Party-in-interest See accompanying report of independent registered public accounting firm. SCHEDULE 2 THE ST. PAUL COMPANIES, INC. STOCK OWNERSHIP PLAN Schedule H, Line 4j - Schedule of Reportable Transactions Year Ended December 31, 2003 (a) (b) (c) (d) (f) Expenses Description Incurred Identity of of Purchase Selling with Issuer Investment Price Price Transaction - -------------- ---------- -------- ------- ----------- * The St. Paul Companies, Common $15,054,091 $ - $ - Inc. Stock - 34,697,934 24,703 * U.S. Bank, N.A. First American Prime Obligation Class Y Institutional 20,475,797 - - Fund - 20,930,127 - * Fidelity Institutional Management Cash Trust Company Portfolio MM Fund Class I 36,866,492 - - Shares - 36,754,517 - (g) (h) (i) Current Value Description on Identity of of Distribution Issuer Investment Cost Date Net Gain - -------------- ---------- -------- ------- ----------- * The St. Paul Companies, Common $15,054,091 $15,054,091 $ - Inc. Stock 22,443,204 34,697,934 12,254,730 * U.S. Bank, N.A. First American Prime Obligation Class Y Institutional 20,475,797 20,475,797 - Fund 20,930,127 20,930,127 - * Fidelity Institutional Management Cash Trust Company Portfolio MM Fund Class I 36,866,492 36,866,492 - Shares 36,754,517 36,754,517 - * Party-in-interest See accompanying report of independent registered public accounting firm. SIGNATURE --------- The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. June 25, 2004 THE ST. PAUL COMPANIES, INC. SAVINGS PLUS PLAN (The Plan) By John P. Clifford Jr. -------------------- John P. Clifford Jr. Senior Vice President, Human Resources Member of the Administrative Committee for The St. Paul Companies, Inc. Stock Ownership Plan Exhibit Index ------------- Exhibit Number Description - -------------- ---------------------------------------- 23.1 Consent of KPMG LLP, Independent Auditors EX-23 2 elevkcons03.txt EXHIBIT 23 Exhibit 23.1 Consent of Independent Registered Public Accounting Firm The Board of Directors The St. Paul Companies, Inc. We consent to incorporation by reference in the registration statement (No. 333-65728) on Form S-8 of The St. Paul Companies, Inc., of our report dated June 25, 2004, relating to the statements of net assets available for benefits of The St. Paul Companies, Inc. Stock Ownership Plan as of December 31, 2003 and 2002, the related statements of changes in net assets available for benefits for the years then ended, and the related schedules as of December 31, 2003, which reports appear in the December 31, 2003 annual report on Form 11-K of the St. Paul Companies, Inc. Stock Ownership Plan. KPMG LLP -------- KPMG LLP Minneapolis, Minnesota June 25, 2004 -----END PRIVACY-ENHANCED MESSAGE-----