St. Paul Cos. Post $214 Million Profit

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NU Online News Service, July 31, 10:39 a.m.EDT?The St. Paul Companies Inc. posted $214 million forits second-quarter profit, helped by strong performance of ongoinginsurance segments.

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In comparison, the St. Paul, Minn.-based insurer suffered a netloss of $223 million one year ago, but that figure reflected a $380million one-time charge related to its Western MacArthur asbestossettlement.

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Looking closely at the second-quarter numbers, St. Paul's totalearned premiums were $1.7 billion, a drop of about 13 percentcompared to $1.96 billion posted one year ago. Total revenues werealso down, to $2.17 billion from $2.34 billion recorded during theyear-ago period.

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But St. Paul pointed out this decline was mainly caused by thecompany's pulling out of some loss-making lines of business in2002.

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Vinay Saqi, analyst at New York-based Morgan Stanley, also notedthat overall, growth in the core segments was good at St. Paul, but"we did not adequately provide for runoff losses" that reached $49million.

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Still, St. Paul's ongoing businesses have been showing steadyimprovements, with net earned premiums rising 17.2 percent to reach$1.59 billion compared to one year ago.

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Jay Fishman, chief executive officer at St. Paul, noted during aconference call that the growth of ongoing insurance segments isencouraging. He also commented on his company's ongoing effort totap into the dynamic growth of agency groups.

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"We started with a view, and our view of the business was basedupon what we saw happening at the agent and distributor level," Mr.Fishman explained. "And what's occurred there, and occurred verydramatically, is very aggressive, significant consolidation, whichhas implications, we think, for every insurance company that doesbusiness at the agent level."

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One of St. Paul's strategies has been to get its product linefocused to better match up with "this increasingly powerful,consolidating agency platform."

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He continued that "there was a terrific opportunity for us,"based on "broadening our product line, introducing a competitiveset of general commercial insurance products and attempting toleverage the existing relationships to gain our share of newbusiness."

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Mr. Fishman also explained that this effort does not involverolling books of business from other carriers, aggressive pricingor trying to replace existing insured relationships "that aren'tbroken."

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More importantly, the strategy was based on being in a positionto take advantage of dynamic business growth of agency groups thathave become public, are about to become public or have consolidatedother agencies, Mr. Fishman said.

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He said St. Paul is "off to a good start" on the acquisition ofrenewal rights to some of Kemper's business.

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"In fact, what's been so interesting to us is the number ofagency relationships we have been able to expand that had strongKemper relationships that we had no presence with," he said. "Weare very pleased with the agents' initial response to expandingtheir business with us and with the quality of business we havebooked to date."

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