St. Paul Quarterly Net Falls 79% After Charge

The company said its total revenue for the quarter grew 13 percent to $2.32 billion from one year ago. Its ongoing business segments' net earned premiums came in at $1.83 billion for the quarter, up 22.8 percent from one year earlier, while net written premiums were $1.86 billion, up 24.6 percent.

The company said its ongoing segments' statutory combined ratio also improved to 89.5, down from 100.1 during the 2002 fourth quarter.

St. Paul's Nuveen Investment unit also did well, reporting an 18.8 percent jump in its contribution to overall quarterly earnings, to $32 million.

For full-year 2003, St. Paul reported net income of $661 million, improving from net income of $218 million reported for 2002. But revenue fell slightly for the year, down 1.9 percent to $8.85 million from $9.03 billion reported for 2002.

St. Paul Chief Executive Jay Fishman said during a conference call today that the insurer's ongoing businesses produced "strong and improving results, thanks to St. Paul's continued focus on profitable growth, disciplined underwriting and expense consciousness."

The company posted operating earnings of $620 million for the year and generated operating return on equity for the year of 11.6 percent, after the impact of heath care reserve adjustment in both cases.

Mr. Fishman told analysts: "The ongoing businesses continue to perform very well, generating substantial underwriting profits and positive cash-flow, and Nuveen Investments continues to a very strong contributor to our earnings."

However, losses in St. Paul's runoff businesses dampened overall insurance underwriting results, Mr. Fishman pointed out. "We are hopeful that the heath care reserve increase and other actions we have taken this quarter as well as this year put the topic of reserve adequacy behind us," he said, "and allow us to focus on the continued performance of our ongoing businesses and opportunities created by the announced merger with Travelers."

Mr. Fishman said that while his company is "disappointed" that a reserve charge was required, it still doesn't dampen St. Paul's enthusiasm or confidence in sustaining mid-teens or higher return on equity in 2004.

Looking at fourth-quarter results in different ongoing segments, St. Paul's specialty-commercial line's net written premiums grew 24.9 percent to $1.23 billion for the quarter. The statutory combined ratio was 92.7, down from 105.8 one year ago. This segment reported pretax underwriting profits of $81 million for the fourth quarter, in contrast to a loss of $93 million reported during the corresponding quarter in 2002.

In commercial lines, St. Paul's net written premiums for the quarter rose 23.9 percent to $627 million from one year ago. The statutory combined ratio also improved, down to 83 from 88.5 a year earlier. Fourth-quarter pretax underwriting profit for the commercial-lines segment was $101 million, nearly double the $51 million reported one year ago.

St. Paul's net investment income came in at $285 million for the quarter, down slightly from $288 million for the 2002 fourth quarter. Realized investment gains for the quarter were $57 million, basically unchanged from $56 million reported in the year-ago period.

In its asset management unit, Nuveen Investments contributed after-tax net income of $32 million in the quarter, compared to $27 million one year ago. Total assets managed grew to $95.4 billion at the end of the quarter, up 20 percent from $79.7 billion at the end of 2002.