SEC To St. Paul Travelers: List $300M Loss
NU Online News Service, Aug. 2, 2:25 p.m. EDT?St. Paul Travelers said today that it will post a loss for the quarter based on advice from the Securities Exchange Commission on how to account for a $1.6 billion pre-tax reserve charge.[@@]
The Minnesota-based insurer said it will report a second-quarter 2004 net loss in the range of $275 million to $300 million, or 42 cents to 45 cents per share, after seeking guidance from the Securities and Exchange Commission on how to properly account for the reserve charge.
The St. Paul Travelers was formed from the merger of Travelers Property Casualty Corp. and The St. Paul Companies on April 1.
On July 23, the merged company said it asked the SEC whether its reserve boost should be treated as an adjustment to the opening balance sheet of the merged companies, with no hit to second-quarter income, or whether the adjustment will indeed flow through the income statement.
According to St. Paul Travelers, "The SEC staff has now provided general guidance and, based on this guidance, St. Paul Travelers determined that it was appropriate to reflect the adjustments in the income statement."
On July 23, Jay Fishman, chief executive officer of St. Paul Travelers, said, "We don't have a bias" with respect to which alternative is ultimately deemed to be correct by the SEC, even though he reported that the alternative interpretation would have allowed the company to report second-quarter income in the range of $775 million to $800 million, or $1.16 to $1.20 per share.
Mr. Fishman and his management team had conducted the July 23 conference when they said it became apparent that there was an inconsistency in the accounting literature that even the firm's auditors couldn't puzzle through?and that that inconsistency would not be sorted out in time to report solid second-quarter numbers on schedule.
St. Paul Travelers expects to officially release its second-quarter 2004 results after Wednesday's market close.
St. Paul Travelers will not raise additional capital in connection with its reserve adjustments, the company said.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.