Minnesota-based The St. Paul Companies announced third-quarter 2003 net income of $214 million, or $.88 per share, up from third-quarter 2002 net income of $63 million, or $.27 per share.
Third-quarter 2003 operating earnings of $233 million, or $.96 per share, were an all-time record for the company. Those operating earnings compared to $121 million, or $.52 per share, for the same period of 2002.
Third quarter 2003 compared favorably to the third quarter of 2002:
*Ongoing segments’ net written premiums of $1.89 billion, up 24.5 percent;
*Total net written premiums of $1.95 billion, up 6.9 percent;
*Ongoing segments’ statutory combined ratio of 90.9, improved from 92.1;
*Total statutory combined ratio of 94.0, improved from 105.7;
*Nuveen Investments contribution of a record $29 million, up 17.5 percent.
The company’s third-quarter annualized operating earnings return on average adjusted equity was 17.1 percent, and annualized net income return on average equity was 13.7 percent. The company’s year-to-date annualized operating earnings return on average adjusted equity was 15.4 percent, and annualized net income return on average equity was 13.5 percent.
“We continue to make tremendous progress in positioning The St. Paul to generate stable, growing earnings for our shareholders,” said Jay Fishman, chairman and CEO. “Our ability to reap the benefits of our 2002 strategic restructuring, the continued concentration on managing expenses and reducing legacy issues during 2003, and our efforts to become a property-liability insurer of choice for our agents, brokers and customers has resulted in record operating earnings in two of the past three quarters. I believe we are very well positioned as we look forward to 2004.”
Third Quarter Financial Highlights
The company’s ongoing insurance segments recorded third-quarter net written premiums of $1.89 billion, or 97.0 percent of total net written premiums. Ongoing segments’ net written premiums were up 24.5 percent over the same period of 2002. In the Other segment, primarily businesses being exited, net written premiums declined to $59 million from $305 million in 2002, primarily due to the transfer of our ongoing reinsurance operations to Platinum Underwriters Holdings, Ltd. in November 2002. Total third-quarter net written premiums of $1.95 billion were up 6.9 percent from the same prior-year period.
Ongoing insurance segments’ net earned premiums grew 23.5 percent to $1.73 billion. Net earned premiums in the Other segment declined from $540 million in third-quarter 2002 to $83 million in 2003. As a result of this decline, total earned premiums for the quarter were $1.81 billion, compared to $1.94 billion in 2002, and total revenues were $2.25 billion, down from $2.30 billion for third-quarter 2002.
The company’s statutory combined ratio for ongoing segments for the third quarter of 2003 was 90.9, with a loss ratio of 62.7, and an expense ratio of 28.2. The overall statutory combined ratio was 94.0, consisting of a loss ratio of 66.3 and an expense ratio of 27.7, an improvement from 105.7 in the third quarter of 2002. Statutory combined ratios for the Other segment are not meaningful. Catastrophe losses in the quarter were immaterial.
Property-Liability Operating Overview
The following discussion of third-quarter results relates to items that are included in both net income and operating earnings. Underwriting profits do not include net investment income.
Specialty Commercial net written premiums grew 19.3 percent to $1.27 billion. The combined ratio was 92.5, compared to 93.7 for the same period in 2002. The year-to-date combined ratio was 93.5, compared to 94.7 for the first nine months of 2002. This segment yielded pretax underwriting profits of $79 million in the third quarter of 2003 and $56 million in the comparable 2002 period.
Net written premiums for Commercial Lines – which includes Middle Market Commercial, Small Commercial and Property Solutions – increased 36.9 percent to $620 million. The combined ratio decreased to 87.2, compared to 88.5 for the same period of 2002. Third-quarter pretax underwriting profit for the segment was $58 million, compared with $41 million for the same period last year.
The Other segment primarily includes the businesses the company decided to exit, as well as development on most of its asbestos and environmental reserves. The company reported pretax underwriting losses of $65 million in this segment in the third quarter of 2003, compared with underwriting losses of $192 million in the third quarter of 2002. The underwriting results in this segment reflect losses of $39 million as a result of prior period reserve adjustments and $26 million of current period losses. Year-to-date underwriting losses of $213 million compared favorably to losses of $904 million for the same period of 2002. The company expects current year pretax underwriting losses in this segment to be less than $10 million per quarter in 2004.
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