Ct Healthmarket via BizWire
07-30-2003, 04:20 AM
SAINT PAUL, Minn.--(BUSINESS WIRE)--July 30, 2003--The St. Paul
Companies (NYSE:SPC) today announced second-quarter 2003 net income of
$214 million, or $.89 per share, up from a second-quarter 2002 net
loss of $223 million, or $1.09 per share. Second-quarter 2003
operating earnings were $172 million, or $.71 per share, up from an
operating loss of $194 million, or $.95 per share, for the comparable
period of 2002. Second-quarter 2003 net income and operating earnings
included a previously announced after-tax surety loss of $56 million,
or $0.23 per diluted share. Second-quarter 2002 net income and
operating earnings included a $380 million after-tax loss, or $1.79
per share, related to the Western MacArthur asbestos settlement.
Second quarter 2003 compared to the second quarter of 2002:
-- Ongoing segments' net written premiums, excluding Lloyd's, up
26.2 percent (a)
-- Net written premiums, excluding Lloyd's, up 10.8 percent (a)
-- Net written premiums of $1.79 billion, down 2.7 percent
The company's second-quarter annualized operating earnings return
on average adjusted equity was 13.0 percent, and annualized net income
return on average equity was 14.1 percent. The company's year-to-date
annualized operating earnings return on average adjusted equity was
14.5 percent, and annualized net income return on average equity was
13.2 percent.
Three Months Six Months
Ended June 30 Ended June 30
($ in millions, except per share
amounts) 2003 2002 2003 2002
----- ------ ----- ------
Net income (loss) $ 214 $ (223) $ 395 $ (90)
Net realized investment (gains) losses (43) 24 (18) 45
Discontinued operations 1 5 1 14
Cumulative effect of accounting change -- -- -- 6
------ ------- ------ -------
Operating earnings (loss) $ 172 $ (194) $ 378 $ (25)
====== ======= ====== =======
Net income (loss) per diluted share $0.89 $(1.09) $1.64 $(0.47)
Operating earnings (loss) per diluted
share $0.71 $(0.95) $1.56 $(0.16)
(a) During the first quarter 2003, the company eliminated a
one-quarter reporting lag for its Lloyd's operation. As a result,
the 2003 equivalent of the seasonally high Lloyd's net written
premiums reported in the second quarter of 2002 was reported in
the first quarter of 2003 making year-over-year comparisons not
meaningful. To improve comparability, the company has eliminated
Lloyd's premiums from both periods where noted in this release. A
reconciliation is provided on page 5 of this release.
"We continue to make substantial progress," said Jay Fishman,
chairman and chief executive officer. "We are particularly pleased
with the net written premium growth of more than 26 percent in our
ongoing insurance segments excluding Lloyd's, which we see as early
evidence of the success of our strategy. We are also off to a good
start on our acquisition of the renewal rights to a portion of
Kemper's business. 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. Nuveen Investments delivered
high-quality earnings growth, with strong net asset flows, continuing
to demonstrate the stability and quality of their business and
diversified product offerings. They increased managed assets to $88
billion."
Second Quarter Financial Highlights
Ongoing insurance segments' net earned premiums grew 17.2 percent
to $1.59 billion. The impact of eliminating the one-quarter reporting
lag at Lloyd's was immaterial to ongoing insurance segments' net
earned premium growth. Net earned premiums in the Other segment,
primarily businesses being exited, declined from $598 million in
second-quarter 2002 to $108 million in 2003. As a result of this
decline, total earned premiums for the quarter were $1.70 billion,
compared to $1.96 billion in 2002, and total revenues were $2.17
billion, down from $2.34 billion for second-quarter 2002.
The company's ongoing insurance segments recorded second-quarter
net written premiums of $1.71 billion, or 95.2 percent of total net
written premiums. Excluding Lloyd's premiums, ongoing insurance
segments' net written premiums grew 26.2 percent in the second quarter
of 2003 over the prior-year period. Including Lloyd's, net written
premiums were up 13.4 percent over the same period of 2002. In the
Other segment, net written premiums declined to $86 million from $337
million in 2002, primarily due to the transfer of our ongoing
reinsurance operations to Platinum Underwriters Holdings, Ltd. in
November 2002. Total second-quarter net written premiums of $1.79
billion were down 2.7 percent from the same prior-year period.
Excluding Lloyd's premiums, total net written premiums grew 10.8
percent.
The company's statutory combined ratio for ongoing segments for
the second quarter of 2003, at 95.3, and the loss ratio at 66.9, both
included 5.4 points from a previously announced surety loss. The
expense ratio improved 1.3 points, to 28.4, from the prior-year second
quarter. The ongoing segments' combined ratio of 91.4 for the second
quarter of 2002 reflected an unusually low level of weather-related
losses. Catastrophe losses in the second quarter of both 2003 and 2002
were not meaningful. The overall statutory combined ratio was 97.8,
consisting of a loss ratio of 69.4 and an expense ratio of 28.4, an
improvement over 132.4 in the second quarter of 2002, which included
29.9 points attributable to the impact of the settlement of the
Western MacArthur litigation.
Nuveen Investments contributed after-tax net income and operating
earnings of $27 million in the quarter, compared to $24 million in the
prior-year period. Assets under management grew to $88.26 billion at
June 30, up 28.9 percent from a year ago.
The company's common shareholders' equity increased to $6.21
billion from $5.68 billion at the end of last year. Reported book
value per common share at June 30, 2003, was $27.25, and $31.27 if
adjusted to include the company's investment in Nuveen Investments at
market value. Reported book value per common share was $25.05 at
year-end 2002. The company's outstanding debt declined by $178 million
compared to year-end 2002, resulting in a debt to capital ratio of
26.1 percent. The company's capital base was $9.70 billion, up $352
million from Dec. 31, 2002.
Property-Liability Operating Overview
The following discussion of second-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
Excluding Lloyd's premiums from both periods, Specialty Commercial
net written premiums grew 25.2 percent. Including Lloyd's, net written
premiums for Specialty Commercial increased 8.2 percent to $1.21
billion. The combined ratio of 96.6, which included 7.7 points related
to the previously announced surety loss, compared to 91.8 for the same
period in 2002. This segment yielded pretax underwriting profits of
$12 million in the second quarter of 2003, which included the impact
of the previously announced $86 million pretax loss in surety. The
segment reported underwriting profits of $73 million in the comparable
2002 period.
Commercial Lines
Net written premiums for Commercial Lines -- which includes Middle
Market Commercial, Small Commercial and Property Solutions --
increased 28.6 percent to $494 million. The combined ratio increased
to 92.3 compared to 91.3 for the same period of 2002, which benefited
from abnormally low weather losses. Second-quarter pretax underwriting
profit for the segment, at $36 million, also reflected the impact of
higher weather-related losses in 2003 vs. 2002. Underwriting profits
for the comparable period last year were $48 million.
Other
The Other segment primarily includes the businesses the company
decided to exit, as well as development on most of our asbestos and
environmental reserves. The company reported pretax underwriting
losses of $49 million in this segment in the second quarter of 2003,
compared with underwriting losses of $712 million in the second
quarter of 2002, which included $585 million of losses related to the
settlement of the Western MacArthur litigation. In the fourth quarter
of 2002, the company revised its estimated impact of the Western
MacArthur settlement from a $585 million pretax loss to a $472 million
pretax loss after an extensive analysis of the relevant reinsurance
contracts.
Investments
Net investment income was $274 million in the quarter, compared to
$286 million in the second quarter of 2002 and $281 million in the
first quarter of 2003. The decline from first quarter was attributable
to a decline in invested asset levels (due to a previously disclosed
$747 million payment, which included interest, that was made in
mid-January 2003 related to the Western MacArthur settlement) and
lower investment yields. The average fixed maturity portfolio yield
has declined from 6.1 percent at the end of first-quarter 2003 to 6.0
percent at the end of second-quarter 2003. After-tax realized gains of
$43 million were primarily driven by venture capital investments, and
compared with after-tax realized losses of $24 million in the year-ago
period. The average credit quality of the company's fixed income
investment portfolio remains AA+.
Asset Management Operating Overview
Nuveen contributed after-tax net income and operating earnings of
$27 million in the quarter compared to $24 million in the prior-year
period. During the second quarter, Nuveen Investments added $2.80
billion in exchange-traded closed-end funds. Total assets under
management grew to $88.26 billion at the end of the quarter, an
increase of 28.9 percent from $68.50 billion at June 30, 2002, and up
10.7 percent from $79.72 billion at Dec. 31, 2002. Nuveen Investments'
gross sales in the second quarter were a record $5.42 billion, with
positive net asset flows of $3.09 billion.
Summary Financial Data
Consolidated Financial Summary
Three Months Six Months
Ended June 30 Ended June 30
(In millions, except per share amounts) 2003 2002 2003 2002
------ ------ ------ ------
Total Revenues $2,171 $2,344 $4,285 $4,678
======= ======= ======= =======
Property-Liability Insurance:
Underwriting Result by Segment:
Specialty Commercial $ 12 $ 73 $ 130 $ 67
Commercial Lines 36 48 74 43
------- ------- ------- -------
Subtotal - ongoing segments 48 121 204 110
Other (49) (712) (148) (712)
------- ------- ------- -------
Total Underwriting Result (1) (591) 56 (602)
Other expense (20) (12) (53) (38)
Net investment income 274 283 554 573
------- ------- ------- -------
Total Property-Liability
Insurance 253 (320) 557 (67)
Asset Management 44 39 86 77
Parent and Other (57) (51) (113) (108)
------- ------- ------- -------
Pretax Operating Earnings (Loss) 240 (332) 530 (98)
Income tax expense (benefit) 68 (138) 152 (73)
------- ------- ------- -------
Operating Earnings (Loss) 172 (194) 378 (25)
Realized investment gains (losses),
net of taxes 43 (24) 18 (45)
Cumulative effect of accounting
change, net of taxes -- -- -- (6)
Discontinued operations, net of
taxes (1) (5) (1) (14)
------- ------- ------- -------
Net Income (Loss) $ 214 $ (223) $ 395 $ (90)
======= ======= ======= =======
Weighted average common shares
outstanding 227.5 208.3 227.3 208.1
Weighted average diluted common shares
outstanding 239.6 208.3 238.6 208.1
Net Income (Loss) per diluted share
Net of taxes, per diluted share: $ 0.89 $(1.09) $ 1.64 $(0.47)
Realized investment (gains)
losses (0.18) 0.12 (0.08) 0.22
Cumulative effect of accounting
change -- -- -- 0.03
Discontinued operations -- 0.02 -- 0.06
------- ------- ------- -------
Operating Earnings (Loss) per diluted
share $ 0.71 $(0.95) $ 1.56 $(0.16)
======= ======= ======= =======
(The increase in outstanding shares is due primarily to the
company's issuance of equity in July 2002.)
Consolidated Balance Sheet Data
June 30 December 31
($ in millions, except per share amounts) 2003 2002
---------- -----------
Assets:
----------------------------------------------
Investments $ 22,307 $ 22,733
Reinsurance recoverables 8,452 8,300
Other receivables 3,240 3,176
Other assets 6,539 5,750
----------- ------------
Total Assets $ 40,538 $ 39,959
=========== ============
Liabilities:
----------------------------------------------
Insurance reserves(b) $ 25,497 $ 26,428
Debt - conventional 2,092 2,270
Debt - equity unit related 443 443
Other liabilities 5,341 4,183
----------- ------------
Total liabilities 33,373 33,324
----------- ------------
Preferred securities 890 889
----------- ------------
Shareholders' Equity:
----------------------------------------------
Common 6,207 5,681
Preferred 68 65
----------- ------------
Total Shareholders' Equity 6,275 5,746
----------- ------------
Total Liabilities and Equity $ 40,538 $ 39,959
=========== ============
Ratio of conventional debt obligations to
total capitalization 21.6% 24.3%
Ratio of total debt obligations to total
capitalization 26.1% 29.0%
Book value per common share $ 27.25 $ 25.05
Book value per common share, adjusted for
Nuveen at after-tax market value $ 31.27 $ 28.82
(b) Reserves include loss and loss adjustment net reserves of $6.45
billion for Other, which is primarily comprised of our runoff
businesses, with a weighted average life of 4.9 years.
Net written premium impact of Lloyd's
Three Months Six Months
Ended June 30 Ended June 30
($ in millions) 2003 2002 chg 2003 2002 chg
------- ------- ------ ------- ------- ------
Total net written
premiums $1,794 $1,843 (2.7)% $3,771 $3,961 (4.8)%
Lloyd's net written
premiums 85 301 470 357
------- ------- ------- -------
Total net written
premiums x/
Lloyd's $1,709 $1,542 10.8% $3,301 $3,604 (8.4)%
======= ======= ======= =======
----------------------------------------------------------------------
----------------------------------------------------------------------
Ongoing segments' net
written premiums $1,708 $1,506 13.4% $3,575 $2,916 22.6%
Lloyd's net written
premiums 81 217 447 241
------- ------- ------- -------
Ongoing segments'
net written
premiums x/
Lloyd's $1,627 $1,289 26.2% $3,128 $2,675 16.9%
======= ======= ======= =======
----------------------------------------------------------------------
----------------------------------------------------------------------
Specialty Commercial net
written premiums $1,214 $1,122 8.2% $2,546 $2,033 25.2%
Lloyd's net written
premiums 81 217 447 241
------- ------- ------- -------
Specialty
Commercial net
written premiums
x/ Lloyd's $1,133 $905 25.2% $2,099 $1,792 17.1%
======= ======= ======= =======
Consolidated Financial Summary, adjusted for the Elimination of the
Reporting Lag for Lloyd's(c)
------ Six Months Ended June 30 ------
Results
Prior to Impact of
Elimination Elimination
of of
Reporting Reporting
Lag(c) Lag(c) As Reported
(In millions, except per share
amounts) 2003 2002
------ ------
Total Revenues $ 4,213 $ 72(d) $4,285 $4,678
========== ========= ======= =======
Property-Liability Insurance:
Underwriting Result by Segment:
Specialty Commercial $ 127 $ 3 $ 130 $ 67
Commercial Lines 74 -- 74 43
---------- --------- ------- -------
Subtotal - ongoing segments 201 3 204 110
Other (143) (5) (148) (712)
---------- --------- ------- -------
Total Underwriting Result 58 (2) 56 (602)
Other expense (50) (3) (53) (38)
Net investment income 552 2 554 573
---------- --------- ------- -------
Total Property-Liability
Insurance 560 (3) 557 (67)
Asset Management 86 -- 86 77
Parent and Other (113) -- (113) (108)
---------- --------- ------- -------
Pretax Operating Earnings (Loss) 533 (3) 530 (98)
Income tax expense (benefit) 153 (1) 152 (73)
---------- --------- ------- -------
Operating Earnings (Loss) 380 (2) 378 (25)
Realized investment gains
(losses), net of taxes 18 -- 18 (45)
Cumulative effect of accounting
change, net of taxes -- -- -- (6)
Discontinued operations, net of
taxes (1) -- (1) (14)
---------- --------- ------- -------
Net Income (Loss) $ 397 $ (2) $ 395 $ (90)
========== ========= ======= =======
Weighted average common shares
outstanding 227.3 227.3 227.3 208.1
Weighted average diluted common
shares outstanding 238.6 238.6 238.6 208.1
Net Income (Loss) and impact per
diluted share $ 1.65 $ (0.01) $ 1.64 $(0.47)
Operating Earnings (Loss) and
impact per diluted share $ 1.57 $ (0.01) $ 1.56 $(0.16)
(c) The elimination of the one-quarter reporting lag for St. Paul at
Lloyd's is also discussed in the first quarter 2003 release.
(d) Applicable net written premium impact of elimination of reporting
lag was $54 million.
Key terms, definitions and reconciliations
Book value per share adjusted for Nuveen Investments marked to market:
(in millions except per share) Impact of Nuveen Book value
Reported at market adjusted for
Nuveen at
market
Common Shareholders' Equity $6,207 $916 $7,123
Common Shares Outstanding 227.8 - 227.8
------ ----- ------
Book Value per Common Share $27.25 $4.02 $31.27
====== ===== ======
The company consolidates Nuveen Investments, then excludes the
minority interest. For purposes of calculating the book value per
share adjustment in the foregoing table, the pretax difference between
the carrying value of our investment in Nuveen Investments and the
quarter-end market value of the shares of Nuveen Investments that we
own is tax-effected at the statutory rate of 35%, and the result is
divided by the number of our common shares outstanding. Since a market
price is available for the shares of Nuveen Investments, we believe
that providing our book value per share adjusted for Nuveen
Investments at market is useful supplemental information for investors
concerning our financial condition. There can be no assurance that we
would receive a price per share similar to the market price if we were
to seek to sell our shares of Nuveen Investments.
Capital Base: Consists of shareholders' equity, debt and preferred
securities.
($ in billions) June 30
2003
Shareholders' equity $6.28
Debt 2.53
Preferred securities 0.89
----------------
Capital Base $9.70
================
Each of the components of our capital base (other than a modest
amount of short-term debt) supports our operations over the longer
term, and we believe that showing a combined capital base is useful
information to investors evaluating our financial condition.
Catastrophe Losses: Effective Jan. 1, 2003, the company changed
its disclosure in that it no longer classifies all losses defined as
catastrophes by the Insurance Services Office (ISO) as "catastrophe
losses." The company revised its definition of losses reported as
"catastrophes" to include only those events that generate losses
beyond a level normally expected in its business. This revised
definition has no impact on recorded results. Prior periods have been
reclassified to conform to this definition.
Debt to Capital Ratio reconciliation: The company shows
conventional debt obligations to total capitalization, which excludes
debt associated with equity unit securities from the numerator. In
August 2005 the holders of equity units, of which this debt is a part,
are obligated to purchase for an amount equal to the principal amount
of the debt a number of shares of our common stock determined pursuant
to a settlement formula specified in the forward contracts that are
part of the equity unit. In light of the special characteristics of
the equity units, the company believes that the conventional debt to
capital ratio presents useful supplemental information to investors
concerning its financial strength.
June 30 December 31
2003 2002
-----------------------------
Conventional debt to capital ratio 21.6% 24.3%
Impact of debt associated with equity
units on debt to capital ratio 4.5% 4.7%
-----------------------------
Debt to capital ratio 26.1% 29.0%
=============================
Statutory Ratios:
Expense Ratio: The company uses the statutory definition of
expenses in calculating expense ratios disclosed. Expenses are divided
by net written premiums to arrive at the expense ratio. "Statutory"
expenses differ from "GAAP" expenses primarily with regard to policy
acquisition costs, which are not deferred and amortized for statutory
purposes, but rather recognized as incurred.
Loss Ratio: The company uses the statutory definition of loss
ratio. This ratio is calculated by dividing the sum of losses and loss
adjustment expenses incurred by net earned premiums. Net earned
premiums, and losses and loss adjustment expenses, are also GAAP
measures.
Combined Ratio: The sum of the statutory expense ratio and the
loss ratio.
Written and Earned Premiums: Net written premiums are a statutory
measure of premium volume that differs from the net earned premiums
reported in our GAAP statement of operations. Written premiums for a
period can be reconciled to earned premiums by adding or subtracting
the change in unearned premium reserves in the period.
Operating Earnings: The company uses operating earnings, a
non-GAAP financial measure, to evaluate The St. Paul's performance.
"Operating earnings" shows net income exclusive of certain items that
are volatile and that we believe may distort the analysis of trends in
our business. Operating earnings consist of net income excluding
after-tax realized gains and losses, after-tax income (or loss) from
discontinued operations, and the after-tax cumulative effect of
accounting changes, each of which may be highly variable from period
to period. Although the investment of premiums to generate investment
income and realized capital gains (or losses) is an integral part of
the company's insurance operations, the determination to realize
capital gains or losses is independent of the insurance underwriting
process. Moreover, under applicable GAAP accounting requirements,
losses can result from other than temporary declines in value without
actual realization. We believe that the level of realized gains or
losses for any particular period is not indicative of the performance
of our ongoing underlying business operations in a particular period.
Results of discontinued operations are not relevant to an assessment
of our ongoing operations, and changes in accounting principles have
nothing to do with our underlying operations. Providing only a GAAP
presentation of net income makes it more difficult for users of our
financial information to evaluate the company's success or failure in
our basic business, and may lead to incorrect or misleading
assumptions and conclusions. We understand that the equity analysts
who follow the company focus on operating earnings in their analyses
for the same reasons discussed above. The excluded items may be
material in a period. The company provides Operating Earnings to
investors so that they have what management believes to be a useful
supplement to GAAP information concerning the company's performance.
Operating Return on Equity: In calculating operating return on
equity, the company uses operating earnings as defined above less
preferred dividends and excludes from average equity the average
unrealized appreciation or depreciation on fixed income securities,
net of tax. Preferred dividends are excluded so that the returns
represent only returns available to common shareholders. Unrealized
appreciation (depreciation) is primarily the result of interest rate
movements and the resultant valuation impact on fixed income
securities generally held to maturity. Such appreciation
(depreciation) is not related to management actions or operational
performance, nor is it likely to be realized. Therefore, the company
believes excluding this unrealized appreciation (depreciation)
provides a more consistent and useful measurement of operating
performance, which supplements GAAP information. Average equity is
calculated using beginning plus ending values for the period, and
dividing by two. We believe that operating return on equity is useful
to investors evaluating our performance because it is a measure of
return that is calculated based on operating earnings (which exclude
volatile items that can distort trends as discussed earlier) and
common shareholders' equity adjusted to eliminate increases and
decreases that primarily result from interest rate changes that are
beyond management's control.
Operating Return on Equity Reconciliation
($ in millions) Three months ended Six months ended
June 30, 2003 June 30, 2003
Net income $ 214 $ 395
Realized gains 43 18
Discontinued operations (1) (1)
Preferred dividends 2 4
------------------ ----------------
Operating earnings available to
common shareholders $ 170 $ 374
================== ================
Annualized operating earnings
available to common shareholders $ 680 $ 748
Operating return on equity 13.0% 14.5%
Average adjusted equity $ 5,230 $ 5,161
Average unrealized appreciation 788 783
------------------ ----------------
Average common equity $ 6,018 $ 5,944
================== ================
Underwriting Results: The company calculates underwriting results
using statutory financial information, adjusting for certain items
(such as the amortization of deferred policy acquisition costs) to
arrive at an underwriting result as calculated with GAAP measures. Our
reported underwriting result is calculated by subtracting incurred
losses and loss adjustment expenses and underwriting expenses (as
adjusted for items such as the impact of deferred policy acquisition
costs) from net earned premiums. This represents our best measure of
profitability for our property-liability underwriting segments. A
reconciliation of statutory underwriting results to the company's
reported underwriting results can be found in the statistical
supplement available on the company's web site.
The St. Paul Companies is headquartered in Saint Paul, Minnesota,
and provides commercial property-liability insurance and asset
management services. The St. Paul reported 2002 revenue from
continuing operations of $8.92 billion and total assets of $39.96
billion, and ranks No. 207 on the Fortune 500 list of largest U.S.
companies. For additional information about The St. Paul's quarterly
results, go to the Investor Relations section of The St. Paul's Web
site: www.stpaul.com.
Certain statements made by the company in this release may
constitute forward-looking statements. Actual results may differ
materially from those projected in the forward-looking statements.
These forward-looking statements involve risks and uncertainties
including, but not limited to, the following: competitive
considerations, including the ability to implement price increases;
the frequency and severity of catastrophic events, including the risk
of large losses from man-made catastrophes such as terrorist attacks;
our achievement of planned expense savings; the timing and impact of
our exiting of certain types of business; changes in the demand for,
pricing of, or supply of reinsurance or insurance; uncertainties
relating to reinsurance recoverables; increased competitive pressure;
the loss of significant customers; worse than anticipated loss
developments from business written in prior years; losses due to
foreign currency exchange rate fluctuations and losses in our
investment portfolio; the risk that losses related to credit-sensitive
products, including surety bonds, could be material in the event of a
sustained economic downturn; changes in our estimate of insurance
industry losses resulting from the Sept. 11, 2001, terrorist attack;
the potential impact of the global war on terrorism and Federal
solutions to make available insurance coverage for acts of terrorism;
regulatory developments; general economic conditions, including
changing interest rates, rates of inflation and the performance of the
financial markets; judicial decisions and rulings; risks relating to
the approval by the bankruptcy court of the settlement of the Western
MacArthur matter; changes in domestic and foreign laws, regulations
and taxes, including risks relating to possible Federal legislation
regarding asbestos related claims; effects of acquisitions and
divestitures; and various other factors. We undertake no obligation to
release publicly the results of any future revisions we may make to
forward-looking statements to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events.
COMMENT ON REGULATION G
Throughout this press release, the company presents its operations
in the way it believes will be most meaningful and useful, as well as
most transparent, to the investing public and others who use this
financial information in evaluating our performance. In addition to
the GAAP presentations of net income and certain statutory reporting
information we show certain non-GAAP measures, including operating
earnings and operating return on equity. All non-GAAP terms are
defined in this press release, together with an explanation of why we
believe such measures may provide useful information to investors
regarding our financial condition or results of operations and a
statement, to the extent material, of any additional purposes our
management uses the non-GAAP financial measure. Reconciliations of
non-GAAP measures (other than the statutory information) to the most
comparable GAAP figures are included in accordance with the
requirements of Regulation G under the Securities Exchange Act of
1934. Non-GAAP measures are often not comparable among issuers, and
are not a substitute for GAAP information.
All financial results herein are unaudited as of the date of this
release.
Companies (NYSE:SPC) today announced second-quarter 2003 net income of
$214 million, or $.89 per share, up from a second-quarter 2002 net
loss of $223 million, or $1.09 per share. Second-quarter 2003
operating earnings were $172 million, or $.71 per share, up from an
operating loss of $194 million, or $.95 per share, for the comparable
period of 2002. Second-quarter 2003 net income and operating earnings
included a previously announced after-tax surety loss of $56 million,
or $0.23 per diluted share. Second-quarter 2002 net income and
operating earnings included a $380 million after-tax loss, or $1.79
per share, related to the Western MacArthur asbestos settlement.
Second quarter 2003 compared to the second quarter of 2002:
-- Ongoing segments' net written premiums, excluding Lloyd's, up
26.2 percent (a)
-- Net written premiums, excluding Lloyd's, up 10.8 percent (a)
-- Net written premiums of $1.79 billion, down 2.7 percent
The company's second-quarter annualized operating earnings return
on average adjusted equity was 13.0 percent, and annualized net income
return on average equity was 14.1 percent. The company's year-to-date
annualized operating earnings return on average adjusted equity was
14.5 percent, and annualized net income return on average equity was
13.2 percent.
Three Months Six Months
Ended June 30 Ended June 30
($ in millions, except per share
amounts) 2003 2002 2003 2002
----- ------ ----- ------
Net income (loss) $ 214 $ (223) $ 395 $ (90)
Net realized investment (gains) losses (43) 24 (18) 45
Discontinued operations 1 5 1 14
Cumulative effect of accounting change -- -- -- 6
------ ------- ------ -------
Operating earnings (loss) $ 172 $ (194) $ 378 $ (25)
====== ======= ====== =======
Net income (loss) per diluted share $0.89 $(1.09) $1.64 $(0.47)
Operating earnings (loss) per diluted
share $0.71 $(0.95) $1.56 $(0.16)
(a) During the first quarter 2003, the company eliminated a
one-quarter reporting lag for its Lloyd's operation. As a result,
the 2003 equivalent of the seasonally high Lloyd's net written
premiums reported in the second quarter of 2002 was reported in
the first quarter of 2003 making year-over-year comparisons not
meaningful. To improve comparability, the company has eliminated
Lloyd's premiums from both periods where noted in this release. A
reconciliation is provided on page 5 of this release.
"We continue to make substantial progress," said Jay Fishman,
chairman and chief executive officer. "We are particularly pleased
with the net written premium growth of more than 26 percent in our
ongoing insurance segments excluding Lloyd's, which we see as early
evidence of the success of our strategy. We are also off to a good
start on our acquisition of the renewal rights to a portion of
Kemper's business. 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. Nuveen Investments delivered
high-quality earnings growth, with strong net asset flows, continuing
to demonstrate the stability and quality of their business and
diversified product offerings. They increased managed assets to $88
billion."
Second Quarter Financial Highlights
Ongoing insurance segments' net earned premiums grew 17.2 percent
to $1.59 billion. The impact of eliminating the one-quarter reporting
lag at Lloyd's was immaterial to ongoing insurance segments' net
earned premium growth. Net earned premiums in the Other segment,
primarily businesses being exited, declined from $598 million in
second-quarter 2002 to $108 million in 2003. As a result of this
decline, total earned premiums for the quarter were $1.70 billion,
compared to $1.96 billion in 2002, and total revenues were $2.17
billion, down from $2.34 billion for second-quarter 2002.
The company's ongoing insurance segments recorded second-quarter
net written premiums of $1.71 billion, or 95.2 percent of total net
written premiums. Excluding Lloyd's premiums, ongoing insurance
segments' net written premiums grew 26.2 percent in the second quarter
of 2003 over the prior-year period. Including Lloyd's, net written
premiums were up 13.4 percent over the same period of 2002. In the
Other segment, net written premiums declined to $86 million from $337
million in 2002, primarily due to the transfer of our ongoing
reinsurance operations to Platinum Underwriters Holdings, Ltd. in
November 2002. Total second-quarter net written premiums of $1.79
billion were down 2.7 percent from the same prior-year period.
Excluding Lloyd's premiums, total net written premiums grew 10.8
percent.
The company's statutory combined ratio for ongoing segments for
the second quarter of 2003, at 95.3, and the loss ratio at 66.9, both
included 5.4 points from a previously announced surety loss. The
expense ratio improved 1.3 points, to 28.4, from the prior-year second
quarter. The ongoing segments' combined ratio of 91.4 for the second
quarter of 2002 reflected an unusually low level of weather-related
losses. Catastrophe losses in the second quarter of both 2003 and 2002
were not meaningful. The overall statutory combined ratio was 97.8,
consisting of a loss ratio of 69.4 and an expense ratio of 28.4, an
improvement over 132.4 in the second quarter of 2002, which included
29.9 points attributable to the impact of the settlement of the
Western MacArthur litigation.
Nuveen Investments contributed after-tax net income and operating
earnings of $27 million in the quarter, compared to $24 million in the
prior-year period. Assets under management grew to $88.26 billion at
June 30, up 28.9 percent from a year ago.
The company's common shareholders' equity increased to $6.21
billion from $5.68 billion at the end of last year. Reported book
value per common share at June 30, 2003, was $27.25, and $31.27 if
adjusted to include the company's investment in Nuveen Investments at
market value. Reported book value per common share was $25.05 at
year-end 2002. The company's outstanding debt declined by $178 million
compared to year-end 2002, resulting in a debt to capital ratio of
26.1 percent. The company's capital base was $9.70 billion, up $352
million from Dec. 31, 2002.
Property-Liability Operating Overview
The following discussion of second-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
Excluding Lloyd's premiums from both periods, Specialty Commercial
net written premiums grew 25.2 percent. Including Lloyd's, net written
premiums for Specialty Commercial increased 8.2 percent to $1.21
billion. The combined ratio of 96.6, which included 7.7 points related
to the previously announced surety loss, compared to 91.8 for the same
period in 2002. This segment yielded pretax underwriting profits of
$12 million in the second quarter of 2003, which included the impact
of the previously announced $86 million pretax loss in surety. The
segment reported underwriting profits of $73 million in the comparable
2002 period.
Commercial Lines
Net written premiums for Commercial Lines -- which includes Middle
Market Commercial, Small Commercial and Property Solutions --
increased 28.6 percent to $494 million. The combined ratio increased
to 92.3 compared to 91.3 for the same period of 2002, which benefited
from abnormally low weather losses. Second-quarter pretax underwriting
profit for the segment, at $36 million, also reflected the impact of
higher weather-related losses in 2003 vs. 2002. Underwriting profits
for the comparable period last year were $48 million.
Other
The Other segment primarily includes the businesses the company
decided to exit, as well as development on most of our asbestos and
environmental reserves. The company reported pretax underwriting
losses of $49 million in this segment in the second quarter of 2003,
compared with underwriting losses of $712 million in the second
quarter of 2002, which included $585 million of losses related to the
settlement of the Western MacArthur litigation. In the fourth quarter
of 2002, the company revised its estimated impact of the Western
MacArthur settlement from a $585 million pretax loss to a $472 million
pretax loss after an extensive analysis of the relevant reinsurance
contracts.
Investments
Net investment income was $274 million in the quarter, compared to
$286 million in the second quarter of 2002 and $281 million in the
first quarter of 2003. The decline from first quarter was attributable
to a decline in invested asset levels (due to a previously disclosed
$747 million payment, which included interest, that was made in
mid-January 2003 related to the Western MacArthur settlement) and
lower investment yields. The average fixed maturity portfolio yield
has declined from 6.1 percent at the end of first-quarter 2003 to 6.0
percent at the end of second-quarter 2003. After-tax realized gains of
$43 million were primarily driven by venture capital investments, and
compared with after-tax realized losses of $24 million in the year-ago
period. The average credit quality of the company's fixed income
investment portfolio remains AA+.
Asset Management Operating Overview
Nuveen contributed after-tax net income and operating earnings of
$27 million in the quarter compared to $24 million in the prior-year
period. During the second quarter, Nuveen Investments added $2.80
billion in exchange-traded closed-end funds. Total assets under
management grew to $88.26 billion at the end of the quarter, an
increase of 28.9 percent from $68.50 billion at June 30, 2002, and up
10.7 percent from $79.72 billion at Dec. 31, 2002. Nuveen Investments'
gross sales in the second quarter were a record $5.42 billion, with
positive net asset flows of $3.09 billion.
Summary Financial Data
Consolidated Financial Summary
Three Months Six Months
Ended June 30 Ended June 30
(In millions, except per share amounts) 2003 2002 2003 2002
------ ------ ------ ------
Total Revenues $2,171 $2,344 $4,285 $4,678
======= ======= ======= =======
Property-Liability Insurance:
Underwriting Result by Segment:
Specialty Commercial $ 12 $ 73 $ 130 $ 67
Commercial Lines 36 48 74 43
------- ------- ------- -------
Subtotal - ongoing segments 48 121 204 110
Other (49) (712) (148) (712)
------- ------- ------- -------
Total Underwriting Result (1) (591) 56 (602)
Other expense (20) (12) (53) (38)
Net investment income 274 283 554 573
------- ------- ------- -------
Total Property-Liability
Insurance 253 (320) 557 (67)
Asset Management 44 39 86 77
Parent and Other (57) (51) (113) (108)
------- ------- ------- -------
Pretax Operating Earnings (Loss) 240 (332) 530 (98)
Income tax expense (benefit) 68 (138) 152 (73)
------- ------- ------- -------
Operating Earnings (Loss) 172 (194) 378 (25)
Realized investment gains (losses),
net of taxes 43 (24) 18 (45)
Cumulative effect of accounting
change, net of taxes -- -- -- (6)
Discontinued operations, net of
taxes (1) (5) (1) (14)
------- ------- ------- -------
Net Income (Loss) $ 214 $ (223) $ 395 $ (90)
======= ======= ======= =======
Weighted average common shares
outstanding 227.5 208.3 227.3 208.1
Weighted average diluted common shares
outstanding 239.6 208.3 238.6 208.1
Net Income (Loss) per diluted share
Net of taxes, per diluted share: $ 0.89 $(1.09) $ 1.64 $(0.47)
Realized investment (gains)
losses (0.18) 0.12 (0.08) 0.22
Cumulative effect of accounting
change -- -- -- 0.03
Discontinued operations -- 0.02 -- 0.06
------- ------- ------- -------
Operating Earnings (Loss) per diluted
share $ 0.71 $(0.95) $ 1.56 $(0.16)
======= ======= ======= =======
(The increase in outstanding shares is due primarily to the
company's issuance of equity in July 2002.)
Consolidated Balance Sheet Data
June 30 December 31
($ in millions, except per share amounts) 2003 2002
---------- -----------
Assets:
----------------------------------------------
Investments $ 22,307 $ 22,733
Reinsurance recoverables 8,452 8,300
Other receivables 3,240 3,176
Other assets 6,539 5,750
----------- ------------
Total Assets $ 40,538 $ 39,959
=========== ============
Liabilities:
----------------------------------------------
Insurance reserves(b) $ 25,497 $ 26,428
Debt - conventional 2,092 2,270
Debt - equity unit related 443 443
Other liabilities 5,341 4,183
----------- ------------
Total liabilities 33,373 33,324
----------- ------------
Preferred securities 890 889
----------- ------------
Shareholders' Equity:
----------------------------------------------
Common 6,207 5,681
Preferred 68 65
----------- ------------
Total Shareholders' Equity 6,275 5,746
----------- ------------
Total Liabilities and Equity $ 40,538 $ 39,959
=========== ============
Ratio of conventional debt obligations to
total capitalization 21.6% 24.3%
Ratio of total debt obligations to total
capitalization 26.1% 29.0%
Book value per common share $ 27.25 $ 25.05
Book value per common share, adjusted for
Nuveen at after-tax market value $ 31.27 $ 28.82
(b) Reserves include loss and loss adjustment net reserves of $6.45
billion for Other, which is primarily comprised of our runoff
businesses, with a weighted average life of 4.9 years.
Net written premium impact of Lloyd's
Three Months Six Months
Ended June 30 Ended June 30
($ in millions) 2003 2002 chg 2003 2002 chg
------- ------- ------ ------- ------- ------
Total net written
premiums $1,794 $1,843 (2.7)% $3,771 $3,961 (4.8)%
Lloyd's net written
premiums 85 301 470 357
------- ------- ------- -------
Total net written
premiums x/
Lloyd's $1,709 $1,542 10.8% $3,301 $3,604 (8.4)%
======= ======= ======= =======
----------------------------------------------------------------------
----------------------------------------------------------------------
Ongoing segments' net
written premiums $1,708 $1,506 13.4% $3,575 $2,916 22.6%
Lloyd's net written
premiums 81 217 447 241
------- ------- ------- -------
Ongoing segments'
net written
premiums x/
Lloyd's $1,627 $1,289 26.2% $3,128 $2,675 16.9%
======= ======= ======= =======
----------------------------------------------------------------------
----------------------------------------------------------------------
Specialty Commercial net
written premiums $1,214 $1,122 8.2% $2,546 $2,033 25.2%
Lloyd's net written
premiums 81 217 447 241
------- ------- ------- -------
Specialty
Commercial net
written premiums
x/ Lloyd's $1,133 $905 25.2% $2,099 $1,792 17.1%
======= ======= ======= =======
Consolidated Financial Summary, adjusted for the Elimination of the
Reporting Lag for Lloyd's(c)
------ Six Months Ended June 30 ------
Results
Prior to Impact of
Elimination Elimination
of of
Reporting Reporting
Lag(c) Lag(c) As Reported
(In millions, except per share
amounts) 2003 2002
------ ------
Total Revenues $ 4,213 $ 72(d) $4,285 $4,678
========== ========= ======= =======
Property-Liability Insurance:
Underwriting Result by Segment:
Specialty Commercial $ 127 $ 3 $ 130 $ 67
Commercial Lines 74 -- 74 43
---------- --------- ------- -------
Subtotal - ongoing segments 201 3 204 110
Other (143) (5) (148) (712)
---------- --------- ------- -------
Total Underwriting Result 58 (2) 56 (602)
Other expense (50) (3) (53) (38)
Net investment income 552 2 554 573
---------- --------- ------- -------
Total Property-Liability
Insurance 560 (3) 557 (67)
Asset Management 86 -- 86 77
Parent and Other (113) -- (113) (108)
---------- --------- ------- -------
Pretax Operating Earnings (Loss) 533 (3) 530 (98)
Income tax expense (benefit) 153 (1) 152 (73)
---------- --------- ------- -------
Operating Earnings (Loss) 380 (2) 378 (25)
Realized investment gains
(losses), net of taxes 18 -- 18 (45)
Cumulative effect of accounting
change, net of taxes -- -- -- (6)
Discontinued operations, net of
taxes (1) -- (1) (14)
---------- --------- ------- -------
Net Income (Loss) $ 397 $ (2) $ 395 $ (90)
========== ========= ======= =======
Weighted average common shares
outstanding 227.3 227.3 227.3 208.1
Weighted average diluted common
shares outstanding 238.6 238.6 238.6 208.1
Net Income (Loss) and impact per
diluted share $ 1.65 $ (0.01) $ 1.64 $(0.47)
Operating Earnings (Loss) and
impact per diluted share $ 1.57 $ (0.01) $ 1.56 $(0.16)
(c) The elimination of the one-quarter reporting lag for St. Paul at
Lloyd's is also discussed in the first quarter 2003 release.
(d) Applicable net written premium impact of elimination of reporting
lag was $54 million.
Key terms, definitions and reconciliations
Book value per share adjusted for Nuveen Investments marked to market:
(in millions except per share) Impact of Nuveen Book value
Reported at market adjusted for
Nuveen at
market
Common Shareholders' Equity $6,207 $916 $7,123
Common Shares Outstanding 227.8 - 227.8
------ ----- ------
Book Value per Common Share $27.25 $4.02 $31.27
====== ===== ======
The company consolidates Nuveen Investments, then excludes the
minority interest. For purposes of calculating the book value per
share adjustment in the foregoing table, the pretax difference between
the carrying value of our investment in Nuveen Investments and the
quarter-end market value of the shares of Nuveen Investments that we
own is tax-effected at the statutory rate of 35%, and the result is
divided by the number of our common shares outstanding. Since a market
price is available for the shares of Nuveen Investments, we believe
that providing our book value per share adjusted for Nuveen
Investments at market is useful supplemental information for investors
concerning our financial condition. There can be no assurance that we
would receive a price per share similar to the market price if we were
to seek to sell our shares of Nuveen Investments.
Capital Base: Consists of shareholders' equity, debt and preferred
securities.
($ in billions) June 30
2003
Shareholders' equity $6.28
Debt 2.53
Preferred securities 0.89
----------------
Capital Base $9.70
================
Each of the components of our capital base (other than a modest
amount of short-term debt) supports our operations over the longer
term, and we believe that showing a combined capital base is useful
information to investors evaluating our financial condition.
Catastrophe Losses: Effective Jan. 1, 2003, the company changed
its disclosure in that it no longer classifies all losses defined as
catastrophes by the Insurance Services Office (ISO) as "catastrophe
losses." The company revised its definition of losses reported as
"catastrophes" to include only those events that generate losses
beyond a level normally expected in its business. This revised
definition has no impact on recorded results. Prior periods have been
reclassified to conform to this definition.
Debt to Capital Ratio reconciliation: The company shows
conventional debt obligations to total capitalization, which excludes
debt associated with equity unit securities from the numerator. In
August 2005 the holders of equity units, of which this debt is a part,
are obligated to purchase for an amount equal to the principal amount
of the debt a number of shares of our common stock determined pursuant
to a settlement formula specified in the forward contracts that are
part of the equity unit. In light of the special characteristics of
the equity units, the company believes that the conventional debt to
capital ratio presents useful supplemental information to investors
concerning its financial strength.
June 30 December 31
2003 2002
-----------------------------
Conventional debt to capital ratio 21.6% 24.3%
Impact of debt associated with equity
units on debt to capital ratio 4.5% 4.7%
-----------------------------
Debt to capital ratio 26.1% 29.0%
=============================
Statutory Ratios:
Expense Ratio: The company uses the statutory definition of
expenses in calculating expense ratios disclosed. Expenses are divided
by net written premiums to arrive at the expense ratio. "Statutory"
expenses differ from "GAAP" expenses primarily with regard to policy
acquisition costs, which are not deferred and amortized for statutory
purposes, but rather recognized as incurred.
Loss Ratio: The company uses the statutory definition of loss
ratio. This ratio is calculated by dividing the sum of losses and loss
adjustment expenses incurred by net earned premiums. Net earned
premiums, and losses and loss adjustment expenses, are also GAAP
measures.
Combined Ratio: The sum of the statutory expense ratio and the
loss ratio.
Written and Earned Premiums: Net written premiums are a statutory
measure of premium volume that differs from the net earned premiums
reported in our GAAP statement of operations. Written premiums for a
period can be reconciled to earned premiums by adding or subtracting
the change in unearned premium reserves in the period.
Operating Earnings: The company uses operating earnings, a
non-GAAP financial measure, to evaluate The St. Paul's performance.
"Operating earnings" shows net income exclusive of certain items that
are volatile and that we believe may distort the analysis of trends in
our business. Operating earnings consist of net income excluding
after-tax realized gains and losses, after-tax income (or loss) from
discontinued operations, and the after-tax cumulative effect of
accounting changes, each of which may be highly variable from period
to period. Although the investment of premiums to generate investment
income and realized capital gains (or losses) is an integral part of
the company's insurance operations, the determination to realize
capital gains or losses is independent of the insurance underwriting
process. Moreover, under applicable GAAP accounting requirements,
losses can result from other than temporary declines in value without
actual realization. We believe that the level of realized gains or
losses for any particular period is not indicative of the performance
of our ongoing underlying business operations in a particular period.
Results of discontinued operations are not relevant to an assessment
of our ongoing operations, and changes in accounting principles have
nothing to do with our underlying operations. Providing only a GAAP
presentation of net income makes it more difficult for users of our
financial information to evaluate the company's success or failure in
our basic business, and may lead to incorrect or misleading
assumptions and conclusions. We understand that the equity analysts
who follow the company focus on operating earnings in their analyses
for the same reasons discussed above. The excluded items may be
material in a period. The company provides Operating Earnings to
investors so that they have what management believes to be a useful
supplement to GAAP information concerning the company's performance.
Operating Return on Equity: In calculating operating return on
equity, the company uses operating earnings as defined above less
preferred dividends and excludes from average equity the average
unrealized appreciation or depreciation on fixed income securities,
net of tax. Preferred dividends are excluded so that the returns
represent only returns available to common shareholders. Unrealized
appreciation (depreciation) is primarily the result of interest rate
movements and the resultant valuation impact on fixed income
securities generally held to maturity. Such appreciation
(depreciation) is not related to management actions or operational
performance, nor is it likely to be realized. Therefore, the company
believes excluding this unrealized appreciation (depreciation)
provides a more consistent and useful measurement of operating
performance, which supplements GAAP information. Average equity is
calculated using beginning plus ending values for the period, and
dividing by two. We believe that operating return on equity is useful
to investors evaluating our performance because it is a measure of
return that is calculated based on operating earnings (which exclude
volatile items that can distort trends as discussed earlier) and
common shareholders' equity adjusted to eliminate increases and
decreases that primarily result from interest rate changes that are
beyond management's control.
Operating Return on Equity Reconciliation
($ in millions) Three months ended Six months ended
June 30, 2003 June 30, 2003
Net income $ 214 $ 395
Realized gains 43 18
Discontinued operations (1) (1)
Preferred dividends 2 4
------------------ ----------------
Operating earnings available to
common shareholders $ 170 $ 374
================== ================
Annualized operating earnings
available to common shareholders $ 680 $ 748
Operating return on equity 13.0% 14.5%
Average adjusted equity $ 5,230 $ 5,161
Average unrealized appreciation 788 783
------------------ ----------------
Average common equity $ 6,018 $ 5,944
================== ================
Underwriting Results: The company calculates underwriting results
using statutory financial information, adjusting for certain items
(such as the amortization of deferred policy acquisition costs) to
arrive at an underwriting result as calculated with GAAP measures. Our
reported underwriting result is calculated by subtracting incurred
losses and loss adjustment expenses and underwriting expenses (as
adjusted for items such as the impact of deferred policy acquisition
costs) from net earned premiums. This represents our best measure of
profitability for our property-liability underwriting segments. A
reconciliation of statutory underwriting results to the company's
reported underwriting results can be found in the statistical
supplement available on the company's web site.
The St. Paul Companies is headquartered in Saint Paul, Minnesota,
and provides commercial property-liability insurance and asset
management services. The St. Paul reported 2002 revenue from
continuing operations of $8.92 billion and total assets of $39.96
billion, and ranks No. 207 on the Fortune 500 list of largest U.S.
companies. For additional information about The St. Paul's quarterly
results, go to the Investor Relations section of The St. Paul's Web
site: www.stpaul.com.
Certain statements made by the company in this release may
constitute forward-looking statements. Actual results may differ
materially from those projected in the forward-looking statements.
These forward-looking statements involve risks and uncertainties
including, but not limited to, the following: competitive
considerations, including the ability to implement price increases;
the frequency and severity of catastrophic events, including the risk
of large losses from man-made catastrophes such as terrorist attacks;
our achievement of planned expense savings; the timing and impact of
our exiting of certain types of business; changes in the demand for,
pricing of, or supply of reinsurance or insurance; uncertainties
relating to reinsurance recoverables; increased competitive pressure;
the loss of significant customers; worse than anticipated loss
developments from business written in prior years; losses due to
foreign currency exchange rate fluctuations and losses in our
investment portfolio; the risk that losses related to credit-sensitive
products, including surety bonds, could be material in the event of a
sustained economic downturn; changes in our estimate of insurance
industry losses resulting from the Sept. 11, 2001, terrorist attack;
the potential impact of the global war on terrorism and Federal
solutions to make available insurance coverage for acts of terrorism;
regulatory developments; general economic conditions, including
changing interest rates, rates of inflation and the performance of the
financial markets; judicial decisions and rulings; risks relating to
the approval by the bankruptcy court of the settlement of the Western
MacArthur matter; changes in domestic and foreign laws, regulations
and taxes, including risks relating to possible Federal legislation
regarding asbestos related claims; effects of acquisitions and
divestitures; and various other factors. We undertake no obligation to
release publicly the results of any future revisions we may make to
forward-looking statements to reflect events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events.
COMMENT ON REGULATION G
Throughout this press release, the company presents its operations
in the way it believes will be most meaningful and useful, as well as
most transparent, to the investing public and others who use this
financial information in evaluating our performance. In addition to
the GAAP presentations of net income and certain statutory reporting
information we show certain non-GAAP measures, including operating
earnings and operating return on equity. All non-GAAP terms are
defined in this press release, together with an explanation of why we
believe such measures may provide useful information to investors
regarding our financial condition or results of operations and a
statement, to the extent material, of any additional purposes our
management uses the non-GAAP financial measure. Reconciliations of
non-GAAP measures (other than the statutory information) to the most
comparable GAAP figures are included in accordance with the
requirements of Regulation G under the Securities Exchange Act of
1934. Non-GAAP measures are often not comparable among issuers, and
are not a substitute for GAAP information.
All financial results herein are unaudited as of the date of this
release.
