SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report (Date of earliest
event reported): September 28, 2001
THE ST. PAUL COMPANIES, INC.
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(Exact name of Registrant as specified in its charter)
Minnesota 001-10898 41-0518860
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(State of (Commission File (I.R.S. Employer
Incorporation) Number) Identification No.)
385 Washington St., St. Paul, MN 55102
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(Address of principal (Zip Code)
executive offices)
(651) 310-7911
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(Registrant's telephone number,
including area code)
N/A
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(Former name or former address, if changed since last
report)
Item 2. Acquisition or Disposition of Assets.
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(a) On September 28, 2001, The St. Paul Companies' wholly-
owned subsidiary, St. Paul Fire and Marine Insurance
Company, completed the sale of Fidelity and Guaranty
Life Insurance Company (F&G Life), a life, annuity and
structured settlements company based in Baltimore,
Maryland, to Old Mutual plc, a London-based
international financial services company. Pursuant to
the terms of the stock purchase agreement between St.
Paul Fire and Marine Insurance Company and Old Mutual
plc related to this sale of F&G Life, Old Mutual plc
transferred 190,356,631 shares of Old Mutual plc
ordinary shares, valued at $300 million based on the
average closing price of Old Mutual plc shares on the
London Stock Exchange for the ten consecutive trading
days prior to September 27, 2001, $335 million in cash,
and approximately $4 million in interest, to St. Paul
Fire and Marine Insurance Company on September 28, 2001
in exchange for all the outstanding equity securities
of F&G Life. That purchase price was determined
through negotiations between St. Paul Fire and Marine
Insurance Company and Old Mutual plc, and their
respective investment bankers.
(b) Not applicable.
Item 5. Other Events.
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(a) On October 11, 2001, The St. Paul Companies, Inc.
announced that Jay S. Fishman, previously chairman and
chief executive officer of Travelers Insurance Group
Inc. and chief operating officer, finance and risk, of
Travelers' parent, Citigroup Inc., has been named to
succeed Douglas W. Leatherdale as chairman and chief
executive officer of The St. Paul, effective
immediately. Mr. Leatherdale will remain on The St.
Paul's board of directors until May 2002.
Item 7. Financial Statements and Exhibits.
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(a) Not applicable.
(b) Pro Forma Financial Information:
(i) The St. Paul Companies, Inc. Pro Forma Consolidated,
Condensed Balance Sheet as of June 30, 2001.
(ii) The St. Paul Companies, Inc. Pro Forma
Consolidated, Condensed Income Statement for the
six months ended June 30, 2001.
(iii) The St. Paul Companies, Inc. Pro Forma
Consolidated, Condensed Income Statement for the
year ended December 31, 2000 is incorporated herein
by reference to the "Life Insurance Segment"
section of "Note 12-Discontinued Operations" to the
consolidated financial statements included in The
St. Paul Companies, Inc. Quarterly Report on Form
10-Q for the quarter ended March 31, 2001, and
attached hereto as Exhibit 99(a).
Pro Forma Financial Information
The St. Paul Companies, Inc. and Subsidiaries
Pro Forma Consolidated, Condensed Balance Sheet
As of June 30, 2001
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Restated
Previously Pro Forma for Sale
(In millions) Reported Adjustments of F&G Life
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Assets:
Fixed maturities $15,823 $ - $15,823
Other investments 5,202 300 (1) 5,502
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Total investments 21,025 300 21,325
Cash 94 339 (2) 433
Reinsurance recoverable
on unpaid losses 5,121 - 5,121
Other assets 9,237 (657)(3) 8,580
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Total assets 35,477 (18) 35,459
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Liabilities:
Losses and loss
adjustment expense
reserves 18,411 - 18,411
Unearned premium
reserves 3,908 - 3,908
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Total insurance
reserves 22,319 - 22,319
Other liabilities 6,289 48 (4) 6,337
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Total liabilities 28,608 48 28,656
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Shareholders'equity 6,869 (66)(5) 6,803
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Total liabilities
and shareholders'
equity $35,477 ($18) $35,459
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The pro forma adjustments to the pro forma consolidated
condensed balance sheet are as follows:
(1) Record fair value of Old Mutual plc ordinary shares
received in partial consideration for sale of F&G Life.
(2) Record $335 million cash proceeds received in partial
consideration for sale of F&G Life, and $4 million cash
proceeds received from repayment of intercompany interest
receivable.
(3) Record $606 million reduction in net assets of
discontinued operations to reflect sale of F&G Life, $50
million reduction in notes receivable to reflect repayment
of surplus note from F&G Life, and $1 million reduction in
accrued interest receivable to reflect the payment of
interest on the surplus note.
(4) Record accrued federal income tax expense of $36 million
and miscellaneous other expenses of $12 million associated
with the sale of F&G Life.
(5) Record impact on shareholders' equity of net loss
resulting from the sale of F&G Life.
Pro Forma Financial Information
The St. Paul Companies, Inc. and Subsidiaries
Pro Forma Consolidated, Condensed Income Statement
For the Six Months Ended June 30, 2001
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Restated
Previously Pro Forma for Sale
(In millions, except share data) Reported Adjustments of F&G Life
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Revenues:
Premiums earned $3,371 $ - $3,371
Net investment income 635 - 635
Asset management 170 - 170
Realized investment gains 83 - 83
Other 71 - 71
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Total revenues 4,330 - 4,330
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Expenses:
Insurance losses and
loss adjustment expenses 2,529 - 2,529
Policy acquisition expenses 736 - 736
Operating and administrative
expenses 634 - 634
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Total expenses 3,899 - 3,899
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Income from continuing
operations before income
taxes 431 - 431
Income tax expense 126 - 126
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Income from continuing
operations 305 - 305
Discontinued operations,
net of taxes 1 (66) (1) (65)
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Net income $ 306 $(66) $ 240
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Basic earnings per common
share:
Income from continuing
operations $ 1.37 $ - $ 1.37
Discontinued operations,
net of taxes 0.01 (0.31) $(0.30)
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Net income $ 1.38 $(0.31) $ 1.07
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Diluted earnings per common
share:
Income from continuing
operations $ 1.32 $ - $ 1.32
Discontinued operations,
net of taxes 0.01 (0.29) $(0.28)
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Net income $ 1.33 $(0.29) $ 1.04
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For purposes of calculating basic earnings per share, weighted
average shares outstanding totaled 215.3 million. For purposes
of calculating diluted earnings per share, weighted average
shares outstanding totaled 228.1 million.
The pro forma adjustment to the pro forma consolidated
condensed income statement is as follows:
(1) Record loss on disposal of F&G Life, net of taxes.
Comprised of $18 million pretax loss on proceeds, $12
million of pretax expenses associated with the disposal
(primarily underwriting fees and bonuses payable to F&G
Life executives), and $36 million of federal income tax
expense related to the sale.
(c) Exhibits:
Exhibit No. Exhibit
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2(a) Stock Purchase Agreement between St. Paul
Fire and Marine Insurance Company and Old
Mutual plc related to the sale of F&G Life
(the "Agreement") is incorporated by
reference to Exhibit (2)(a) of The St. Paul
Companies, Inc. Quarterly Report on Form 10-Q
for the quarter ended March 31, 2001.
2(b) Letter Agreement between St. Paul Fire and
Marine Insurance Company, Old Mutual plc and
Old Mutual U.S. Life Holdings, Inc., dated as
of September 26, 2001, which amends the
Agreement.
99(a) "Life Insurance Segment" section of "Note 12
- Discontinued Operations" to the
consolidated financial statements included in
The St. Paul Companies, Inc. Quarterly Report
on Form 10-Q for the quarter ended March 31,
2001.
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
THE ST. PAUL COMPANIES, INC.
By /s/ Bruce A. Backberg
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Bruce A. Backberg
Senior Vice President
Date: October 15, 2001