St. Paul Cos. Post $214 Million Profit

St. Paul Cos. Post $214 Million Profit

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

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

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

But St. Paul pointed out this decline was mainly caused by the company's pulling out of some loss-making lines of business in 2002.

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

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

Jay Fishman, chief executive officer at St. Paul, noted during a conference call that the growth of ongoing insurance segments is encouraging. He also commented on his company's ongoing effort to tap into the dynamic growth of agency groups.

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

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

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

Mr. Fishman also explained that this effort does not involve rolling books of business from other carriers, aggressive pricing or trying to replace existing insured relationships "that aren't broken."

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

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

"In fact, what's been so interesting to us is the number of agency relationships we have been able to expand that had strong Kemper relationships that we had no presence with," he said. "We are very pleased with the agents' initial response to expanding their business with us and with the quality of business we have booked to date."