<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>4
<FILENAME>exh99_1.txt
<DESCRIPTION>FINANCIAL STATEMENTS
<TEXT>
Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
On April 1, 2004, Travelers Property Casualty Corp. ("Travelers") merged
with a subsidiary of The St. Paul Companies, Inc. ("St. Paul"), as a result of
which Travelers has become a wholly owned subsidiary of St. Paul (now known as
The St. Paul Travelers Companies, Inc. (the "Company")). Each share of
Travelers class A and class B common stock was exchanged for 0.4334 of a share
of the Company common stock. Share and per share amounts for all periods
presented have been restated to reflect the exchange of Travelers common stock
for the Company common stock. For accounting purposes, this transaction will
be accounted for as a reverse acquisition with Travelers treated as the
accounting acquirer. Accordingly, the transaction will be accounted for as a
purchase business combination, using Travelers' historical financial
information and applying fair value estimates to the acquired assets,
liabilities and commitments of St. Paul as of April 1, 2004.
The preliminary Unaudited Pro Forma Condensed Combined Balance Sheet at
December 31, 2003 combines the historical consolidated balance sheets of St.
Paul and Travelers, giving effect to the merger as if it had been consummated
on December 31, 2003. The preliminary Unaudited Pro Forma Condensed Combined
Income Statement for the year ended December 31, 2003 combines the historical
consolidated statement of income of St. Paul and Travelers giving effect to
the merger as if it had occurred on January 1, 2003. We have adjusted the
historical consolidated financial statements to give effect to pro forma
events that are (1) directly attributable to the merger, (2) factually
supportable, and (3) with respect to the statement of income, expected to have
a continuing impact on the combined results. You should read this information
in conjunction with the:
o accompanying notes to the preliminary unaudited pro forma condensed
combined financial statements;
o St. Paul's separate historical financial statements as of and for
the year ended December 31, 2003 included in St. Paul's Annual
Report on Form 10-K for the year ended December 31, 2003;
o Travelers separate historical financial statements as of and for the
year ended December 31, 2003 included in Travelers Annual Report on
Form 10-K for the year ended December 31, 2003.
The preliminary unaudited pro forma condensed combined financial
statements have been prepared for informational purposes only. The preliminary
unaudited pro forma condensed combined financial statements are not
necessarily indicative of what the financial position or results of operations
actually would have been had the merger been completed at the dates indicated.
In addition, the preliminary unaudited pro forma condensed combined financial
statements do not purport to project the future financial position or
operating results of the combined company. The preliminary unaudited pro forma
condensed combined financial statements do not give consideration to the
impact of possible revenue enhancements, expense efficiencies, synergies or
asset dispositions.
The preliminary unaudited pro forma condensed combined financial
statements have been prepared using the purchase method of accounting with
Travelers treated as the accounting acquirer. Accordingly, Travelers estimated
cost to acquire St. Paul has been allocated to the acquired assets,
liabilities and commitments based upon their estimated fair values at the date
indicated. The allocation of the purchase price is preliminary and is
dependent upon certain valuations and other studies that have not progressed
to a stage where there is sufficient information to make a definitive
allocation. Accordingly, the final purchase accounting adjustments may be
materially different from the preliminary unaudited pro forma adjustments
presented herein.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
At December 31, 2003
---------------------------------------------------------
Pro Forma
Historical Historical Pro Forma St. Paul
Travelers St. Paul Adjustments Travelers
---------- ---------- ----------- ---------
(in millions)
<S> <C> <C> <C> <C>
Assets
Fixed maturities, available for sale at fair value $33,045 $18,021 $ -- $ 51,066
Equity securities, at fair value 733 190 -- 923
Mortgage loans 211 63 -- 274
Investment real estate -- 775 283 (a) 1,058
Short-term securities 2,138 2,709 -- 4,847
Trading securities, at fair value 57 -- -- 57
Other investments 2,469 1,422 -- 3,891
------ ------ ------ --------
Total investments 38,653 23,180 283 62,116
Cash 352 150 -- 502
Investment income accrued 362 248 -- 610
Premium balances receivable 4,089 2,486 -- 6,575
Reinsurance recoverables 11,174 8,718 (417) (b) 19,475
Deferred policy acquisition costs 965 695 (78) (c) 1,582
Deferred federal income taxes 678 1,285 (296) (d) 1,667
Contractholder receivables 3,121 1,585 -- 4,706
Goodwill 2,412 926 (926) (e) 5,257
2,845 (e)
Other intangibles 422 139 (139) (f) 1,622
1,200 (f)
Other assets 2,644 3,374 (384) (g) 5,634
------- ------- ------ --------
Total sssets $64,872 $42,786 $2,088 $109,746
======= ======= ====== ========
Liabilities
Claims and claim adjustment expense reserves $34,573 $21,035 $ (761) (h) $ 54,847
Unearned premium reserves 7,111 4,248 -- 11,359
Contractholder payables 3,121 1,585 -- 4,706
Commercial paper -- 322 -- 322
Long-term debt 1,756 2,057 160 (i) 3,973
Convertible junior subordinated notes payable 869 -- -- 869
Convertible notes payable 49 -- -- 49
Equity unit related debt -- 443 24 (i) 467
St. Paul-obligated mandatorily redeemable preferred
securities of trusts holding solely subordinated
debentures of St. Paul -- 928 109 (i) 1,037
Other liabilities 5,406 5,943 101 (j) 11,450
------- ------- ------ --------
Total liabilities 52,885 36,561 (367) 89,079
------- -------- ------ --------
Shareholders' equity
Preferred stock:
Stock Ownership Plan - convertible preferred stock -- 98 119 (k) 217
Guaranteed obligation - Stock Ownership Plan -- (23) (2) (k) (25)
Common stock:
No par value -- 2,655 14,474 (n,o,p) 17,129
Class A 5 -- (5) (l) --
Class B 5 -- (5) (l) --
Additional paid-in capital 8,705 -- (8,705) (l) --
Retained earnings 2,290 2,874 (2,874) (m) 2,290
Accumulated other changes in equity from
nonowner sources 1,086 621 (621) (m) 1,086
Treasury stock, at cost (74) -- 74 (l) --
Unearned compensation (30) -- -- (30)
------- ------- ------ --------
Total shareholders' equity 11,987 6,225 2,455 20,667
------- ------- ------ --------
Total liabilities and shareholders' equity $64,872 $42,786 $2,088 $109,746
======= ======= ====== ========
See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Statements.
</TABLE>
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT
<TABLE>
<CAPTION>
For the Year Ended December 31, 2003
---------------------------------------------------------
Pro Forma
Historical Historical Pro Forma St. Paul
Travelers St. Paul Adjustments Travelers
---------- ---------- ----------- ---------
(in millions, except per share data)
<S> <C> <C> <C> <C>
Revenues
Premiums $12,545 $7,039 $ -- $19,584
Net investment income 1,869 1,120 (310) (q) 2,679
Fee income 560 59 -- 619
Asset management -- 453 -- 453
Net realized investment gains 38 73 -- 111
Other revenues 127 110 -- 237
------- ------ ------ -------
Total revenues 15,139 8,854 (310) 23,683
------- ------ ------ -------
Claims and expenses
Claims and claim adjustment expenses 9,119 5,208 (57) (r) 14,270
Amortization of deferred policy acquisition costs 1,984 1,564 (375) (s) 3,173
Interest expense 166 187 (37) (t) 316
General and administrative expenses 1,641 1,010 514 (u) 3,165
------- ------ ------ -------
Total claims and expenses 12,910 7,969 45 20,924
------- ------ ------ -------
Income from continuing operations before income
taxes and minority interest 2,229 885 (355) 2,759
Income taxes 537 156 (124) (v) 569
Minority interest, net of tax (4) 30 -- 26
------- ------- ------ ------
Income from continuing operations $ 1,696 $ 699 $ (231) $2,164
======= ======= ====== ======
Per common share information
Earnings per common share-continuing operations
Basic $1.69 $3.00 $3.25
Diluted $1.68 $2.88 $3.19
Weighted average common shares outstanding and
common stock equivalents
Basic 1,002.0 227.7 662.0
Diluted 1,007.3 239.6 676.2
See accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Statements.
</TABLE>
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1 -- Basis of Pro Forma Presentation
On April 1, 2004, Travelers Property Casualty Corp. ("Travelers") merged
with a subsidiary of The St. Paul Companies, Inc. ("St. Paul"), as a result of
which Travelers has become a wholly owned subsidiary of St. Paul (now known as
The St. Paul Travelers Companies, Inc. (the "Company")). Each share of
Travelers class A and class B common stock was exchanged for 0.4334 of a share
of the Company common stock. Share and per share amounts for all periods
presented have been restated to reflect the exchange of Travelers common stock
for the Company common stock. For accounting purposes, this transaction will
be accounted for as a reverse acquisition with Travelers treated as the
accounting acquirer. Accordingly, the transaction will be accounted for as a
purchase business combination, using Travelers' historical financial
information and applying fair value estimates to the acquired assets,
liabilities and commitments of St. Paul as of April 1, 2004.
The preliminary Unaudited Pro Forma Condensed Combined Balance Sheet as
of December 31, 2003 reflects the merger as if it occurred on December 31,
2003. The preliminary Unaudited Pro Forma Condensed Combined Income Statement
for the year ended December 31, 2003 reflects the merger as if it occurred on
January 1, 2003. The pro forma adjustments herein reflect an exchange ratio of
0.4334 of a share of St. Paul common stock for each of the 505.7 million
shares of Travelers class A common stock outstanding and of the 499.8 million
shares of Travelers class B common stock outstanding at December 31, 2003.
The stock price used in determining the preliminary estimated purchase
price is based on an average of the closing price of St. Paul common stock for
the two trading days before through the two trading days after November 17,
2003, the day St. Paul and Travelers announced their merger agreement. The
preliminary estimated purchase price also includes the fair value of the St.
Paul stock options, the fair value adjustment to St. Paul's preferred stock
and other costs of the transaction, and is calculated as follows:
Number of shares of St. Paul common stock outstanding
as of December 31, 2003 (in thousands) 228,393
St. Paul's average stock price for the two trading
days before through the two trading days after
November 17, 2003, the day St. Paul and Travelers
announced their merger agreement $36.86
------
Estimated fair value of St. Paul's common stock
outstanding as of December 31, 2003 (in millions) $8,419
Estimated fair value of 20.7 million St. Paul stock options
outstanding as of December 31, 2003 (in millions) 160
Estimated excess of fair value over book value of St.
Paul's convertible preferred stock outstanding, net
of the excess of the fair value over the book value
of the related guaranteed obligation, as of December
31, 2003 (in millions) 101
Estimated transaction costs of Travelers (in millions) 15
------
Estimated purchase price (in millions) $8,695
======
The preliminary estimated purchase price has been allocated as follows
based upon purchase accounting adjustments as of December 31, 2003 (in
millions):
Net tangible assets(1) $5,160
Investment real estate(2) 283
Reinsurance recoverables(2)(3) (417)
Deferred policy acquisition costs(3) (78)
Deferred federal income taxes(5) (296)
Goodwill 2,845
Intangible assets(4) 1,200
Other assets(2) (384)
Claims and claim adjustment expense reserves(2)(3) 761
Long-term debt(2) (160)
Equity unit related debt(2) (24)
Mandatorily redeemable preferred securities(2) (109)
Other liabilities(2) (86)
------
Estimated purchase price $8,695
======
<PAGE>
----------
(1) Reflects St. Paul's shareholders' equity ($6,225) less St. Paul's
historical goodwill ($926) and intangible assets ($139).
(2) Represents adjustments for fair value.
(3) Represents adjustments to conform St. Paul's accounting policy to that of
Travelers.
(4) Represents identified finite and indefinite life intangible assets;
primarily customer-related insurance intangibles and management contracts
and customer relationships associated with Nuveen's asset management
business.
(5) Represents a deferred tax liability associated with adjustments to fair
value of all assets and liabilities included herein, excluding goodwill,
as this transaction is not treated as a purchase for tax purposes.
The preliminary unaudited pro forma condensed combined financial
statements presented herein are not necessarily indicative of the results of
operations or the combined financial position that would have resulted had the
merger been completed at the dates indicated, nor is it necessarily indicative
of the results of operations in future periods or the future financial
position of the combined company.
The preliminary unaudited pro forma condensed combined financial
statements have been prepared assuming Travelers is the accounting acquirer.
Accordingly, the assets, liabilities and commitments of St. Paul are adjusted
to their fair value. For purposes of these preliminary unaudited pro forma
condensed combined financial statements, consideration has also been given to
the impact of conforming St. Paul's accounting policies to those of Travelers.
Additionally, certain amounts in the historical consolidated financial
statements of St. Paul have been reclassified to conform to the Travelers
financial statement presentation. The preliminary unaudited pro forma
condensed combined financial statements do not give consideration to the
impact of possible revenue enhancements, expense efficiencies, synergies or
asset dispositions. Also, possible adjustments related to restructuring
charges are yet to be determined and are not reflected in the preliminary
unaudited pro forma condensed combined financial statements. Charges or
credits, along with the related tax effects, which result directly from the
transaction and are not expected to have a continuing impact will be included
in income within twelve months succeeding the transaction and were not
considered in the preliminary unaudited pro forma condensed combined income
statement.
The preliminary unaudited pro forma adjustments represent management's
estimates based on information available at this time. Actual adjustments to
the combined balance sheet and income statement will differ, perhaps
materially, from those reflected in these preliminary unaudited pro forma
condensed combined financial statements because the then existing assets and
liabilities of St. Paul will be recorded at their respective fair values on
the date the merger was consummated, and the preliminary assumptions used to
estimate their fair values may have changed between the date of these
preliminary unaudited pro forma condensed combined financial statements and
date the merger was consummated. Estimated fair value adjustments to certain
balance sheet amounts are preliminary and may change as a result of additional
analysis. Additionally, these preliminary pro forma purchase accounting
adjustments do not include possible fair value adjustments related to certain
investments, fixed assets, contracts, leases, other commitments and other
miscellaneous assets and liabilities, pending further analysis. The final
purchase accounting adjustments may be materially different from the
preliminary unaudited pro forma adjustments presented herein.
The preliminary unaudited pro forma adjustments included herein are
subject to other updates as additional information becomes available and as
additional analyses are performed. The final allocation of the purchase price
will be determined after completion of a thorough analysis to determine the
fair values of St. Paul tangible and identifiable intangible assets and
liabilities. Accordingly, the final purchase accounting adjustments, including
conforming of St. Paul's accounting policies to those of Travelers, could be
materially different from the preliminary unaudited pro forma adjustments
presented herein. Any increase or decrease in the fair value of St. Paul's
assets, liabilities, commitments, contracts and other items as compared to the
information shown herein will change the purchase price allocable to goodwill
and may impact the combined income statements due to adjustments in yield
and/or amortization or accretion related to the adjusted assets or
liabilities.
<PAGE>
Note 2 -- Pro Forma Adjustments
The pro forma adjustments related to the preliminary Unaudited Pro Forma
Condensed Combined Balance Sheet as of December 31, 2003 assume the merger
occurred on December 31, 2003. The pro forma adjustments to the preliminary
Unaudited Pro Forma Condensed Combined Income Statement for the year ended
December 31, 2003 assume the merger occurred on January 1, 2003.
The following pro forma adjustments result from the allocation of the
purchase price for the acquisition based on the fair value of the assets,
liabilities and commitments acquired from St. Paul and to conform St. Paul's
accounting policies to Travelers. The amounts and descriptions related to the
preliminary adjustments are as follows:
Increase (Decrease)
as of
December 31, 2003
-----------------
(in millions)
Unaudited Pro Forma Condensed Combined Balance Sheets
Assets
a) Adjustment of carrying amount of investment real
estate to fair value $ 283
b) Reinsurance recoverables--
i. Adjustment to conform the accounting policy for
discounting certain workers' compensation claim
reserves $ (15)
ii. Adjustment to record the reinsurance recoverables
related to claims and claim adjustment expense
reserves at fair value -- See Note 3 $ (402)
c) Adjustment to conform the accounting policy for the
deferral of certain policy acquisition costs $ (78)
d) Adjustment to record the deferred tax liability resulting
from all pro forma adjustments except goodwill at a
statutory rate of 35% $ (296)
e) Net adjustment to eliminate St. Paul's historical goodwill
and to record the goodwill related to this merger $ 1,919
f) Net adjustment to eliminate St. Paul's historical intangible
assets and to record the identifiable intangible assets
related to this merger -- See Note 4 $ 1,061
g) Other assets --
i. Adjustment to record the fair value of St. Paul's
pension plans, using the December 31, 2003 plan
assumptions $ (346)
ii. Adjustment to eliminate St. Paul's unamortized issue
costs related to long-term debt, equity unit related
debt and mandatorily redeemable preferred securities $ (38)
Liabilities
h) Claims and claim adjustment expense reserves --
i. Adjustment to conform the accounting policy for
discounting certain workers' compensation claim
reserves $ (125)
ii. Adjustment to conform the accounting policy for
discounting involuntary market workers' compensation
claim reserves $ 39
iii. Adjustment to record claims and claim adjustment
expense reserves at fair value-- See Note 3 $ (675)
i) Adjustment to record long-term debt, equity unit related
debt and mandatorily redeemable preferred securities at
fair value $ 293
j) Other liabilities--
i. Adjustment to record the fair value of St. Paul's
post-retirement benefit plans, using the
December 31, 2003 plan assumptions $ 86
ii. Adjustment to record the liability for Travelers
estimated merger related transaction costs $ 15
<PAGE>
Shareholders' Equity
k) Preferred stock--
i. Adjustment to record convertible preferred stock at
fair value $ 119
ii. Adjustment to record the guaranteed obligation under
the Preferred Stock Ownership Plan at fair value $ (2)
l) Net adjustment to remove the historical par value of
Travelers class A common stock, class B common stock,
additional paid-in capital and treasury stock $(8,641)
m) Adjustment to remove St. Paul's retained earnings and
accumulated other changes in equity from nonowner sources $(3,495)
n) Adjustment to St. Paul's no par value common stock to
record the impact of "l" and "m" above $12,136
o) Adjustment to record the excess of the fair value of St.
Paul's no par value common stock over its historical common
shareholders' equity based on shares outstanding at December
31, 2003 at an average of the closing price of St. Paul
common stock for the two trading days before through the two
trading days after November 17, 2003, the day St. Paul and
Travelers announced their merger agreement $ 2,146
p) Adjustment to record the fair value of St. Paul's
outstanding stock options $ 192
<PAGE>
Increase (Decrease)
Year ended
December 31,
2003
-------------------
(in millions)
Unaudited Pro Forma Condensed Combined Income Statements
Revenues
q) Adjustment to recognize the amortization of fair value
adjustments allocated to investments using the interest
method over the estimated remaining life of the
investments -- See Note 6 $(310)
Claims and Expenses
r) Adjustment to claims and claim adjustment expenses to
reflect the accretion of fair value -- See Note 3 $ (57)
s) Adjustment to the amortization of deferred policy
acquisition costs due to conforming the accounting policy
described in "c" above $(375)
t) Adjustment to interest expense for the amortization of
fair value adjustments allocated to long-term debt, equity
unit related debt and mandatorily redeemable preferred
securities, using the interest method over the remaining
term to maturity $ (37)
u) General and administrative expenses --
i. Adjustment to amortization expense for the estimated
value of identifiable intangible assets with finite
lives -- See Note 4 $ 130
ii. Adjustment to the amortization of deferred policy
acquisition costs after conforming the accounting
policy described in "c" above $ 384
v) To adjust income taxes for all pro forma adjustments
except goodwill at the statutory rate of 35% $(124)
The pro forma adjustments do not include an anticipated restructuring
charge in conjunction with the merger. The preliminary estimate related to
restructuring is approximately $300 million to $400 million and is subject to
final decisions by management of the combined company. These costs may include
severance payments, asset write-offs and other costs associated with the
process of combining the companies. No determination has been made as to the
allocation of the restructuring reserve between St. Paul and Travelers related
expenditures for purposes of the preliminary unaudited pro forma condensed
combined financial statements.
Certain other assets and liabilities of St. Paul will also be subject to
adjustment to their respective fair values at the time of the merger. Pending
further analysis, no pro forma adjustments are included herein for these
assets and liabilities.
Note 3-- Fair Value of Claims and Claim Adjustment Expense Reserves and
Reinsurance Recoverables
An adjustment has been applied to St. Paul's claims and claim adjustment
expense reserves to estimate their fair value. Since such reserves are not
traded in a secondary market, the determination of a fair value is
approximated by using risk-adjusted present value techniques. Such techniques
require application of significant judgment and assumptions.
The fair value adjustment that was applied included (1) discounting the
reserves at risk-free rates of interest over an assumed period of 30 years and
(2) adding a risk factor that reflects the uncertainty within the reserves.
Various methodologies were considered to address the uncertainty in the
reserves, including alternative measures of the opportunity cost of capital
and other underlying factors.
For purposes of the Unaudited Pro Forma Condensed Combined Income
Statement, which assumes that the merger was consummated on January 1, 2003,
the range of risk-free rates of interest employed in the calculation was
approximately 1.2% to 4.9%, with a weighted average of 3.0% over an assumed
payout period of 30 years and an assumed average payout date of about 3.5 to
4.0 years. The fair value adjustment is being accreted in the pro forma income
statements over the period that the reserves are expected to remain
outstanding, using an interest method that locks in the initial interest rates
by expected payment date.
<PAGE>
For purposes of the Unaudited Pro Forma Condensed Combined Balance Sheet
at December 31, 2003, the range of risk-free rates of interest applied to the
fair value adjustment was approximately 1.1% to 5.3%, with a weighted average
of 3.4% over an assumed payout period of 30 years and an assumed average
payout date of about 3.5 to 4.0 years.
A similar methodology was applied to the related ceded reinsurance
recoverables.
These estimates are subject to change, based on actual interest rates as
of April 1, 2004 (the closing date of the merger) and continuing refinement of
the methodologies underlying risk factor development. As a result, the amount
of the final purchase accounting adjustment and subsequent accretion could
differ materially from the amounts presented in the preliminary unaudited pro
forma condensed combined financial statements.
Note 4 -- Identified Intangible Assets
A summary of the significant identifiable intangible assets and their
respective estimated useful lives is as follows:
December 31, 2003
-----------------------------------------
Intangible
Asset Estimated Amortization
Balance Useful Life Method
---------- ----------- ---------------
($ in
millions)
Insurance Operations:
Customer relationships $540 8 years Accelerated(a)
Contractual agency relationships 20 2 years Straight line
St. Paul trademark and trade name 20 2 years Straight line
State licenses 30 Indefinite N/A
----
Total Insurance Operations $610
====
Asset Management Business(b):
Management contracts and customer
relationships:
Closed-end funds $435 Indefinite N/A
Open-end funds 65 12 years Straight line
Managed wrap/hedge accounts 50 4 years Straight line
Managed institutional accounts 25 7 years Straight line
Nuveen trade name 15 Indefinite N/A
----
Total Asset Management $590
====
(a) Based on rates derived from expected business retention and profitability
levels
(b) Amounts related to this business are included at St. Paul's 79%
approximate ownership interest of Nuveen Investments
Note 5 -- Earnings Per Share
The pro forma earnings per common share data has been computed based on
the combined historical income of St. Paul and Travelers and the impact of
purchase accounting adjustments. Weighted average shares were calculated using
St. Paul's historical weighted average common shares outstanding and Travelers
weighted average common shares outstanding multiplied by the exchange ratio.
Note 6 -- Net Realized Investment Gains (Losses)
The investment portfolio fair value adjustment treats net unrealized
investment gains (losses) as though they were realized, thereby creating a new
basis for such investments. No separate adjustment has been made in the
preliminary Unaudited Pro Forma Condensed Combined Income Statement to adjust
historical net realized investment gains (losses) for the resulting new basis
that would have been established had the merger been completed on January 1,
2003.
Note 7 -- Pension and Post Retirement Benefit Cost
The fair value adjustment for St. Paul's pension and postretirement
benefit plans treats the previously unrecognized prior service cost and net
actuarial loss as though they were recognized. No separate adjustment has been
made in the preliminary Unaudited Pro Forma Condensed Combined Income
Statement to adjust net periodic pension and postretirement benefit cost.
<PAGE>
Note 8 -- Transactions Between St. Paul and Travelers
The preliminary unaudited pro forma condensed combined financial
statements have not been adjusted for the impact of transactions between St.
Paul and Travelers. Based on current analysis, such transactions are not
expected to have a significant impact on the preliminary unaudited pro forma
condensed combined financial statements.
</TEXT>
</DOCUMENT>