The St. Paul Takes $228 Million Reserve Charge

The St. Paul Takes $228 Million Reserve Charge

By Michael Ha

In previous announcements, The St. Paul had said it was continuing to monitor its medical malpractice reserves and that additional reserving actions might be necessary.

Ronald Frank, an analyst at New York-based Smith Barney, commented that this action is "not altogether surprising" since The St. Paul had publicly acknowledged the risk of a reserve boost during its third-quarter conference call. However, Mr. Frank said the amount announced is larger than what had been expected, since it is $100 million more than what The St. Paul had previously estimated to be the "worst case" scenario.

Smith Barney also said it suspects that The St. Paul was motivated to take a conservative approach partly in order to start the pending merger with Travelers Property Casualty Corp. with a clean slate. "The St. Paul management likely has an incentive to clear the decks in advance of the pending merger with Travelers Property Casualty," Mr. Frank commented on the St. Paul, Minn.-based insurer.

The St. Paul, as it took the reserve-charge, said its ongoing business continued to perform well during the 2003 fourth quarter, with net written premiums of $1.86 billion, up 25 percent from one year ago.

The company said its statutory combined ratio was 89.5 percent for the fourth quarter. For full-year 2003, The St. Paul said its ongoing business results would include $7.33 billion in net written premium, which would be a 24 percent increase from 2002, and a statutory combined ratio of 91.7 percent.

The St. Paul expects to release its fourth-quarter 2003 earnings after the market closes next Wednesday. The company said the announced merger of The St. Paul and Travelers remains on track to close in the second quarter of 2004.

The St. Paul offers liability and casualty, property, workers' comp, auto, marine, and other commercial coverage. Its international operations include Lloyd's of London syndicates that specialize in niche markets, including kidnap and ransom, personal accident, and creditor coverage.