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): JUNE 3, 2002
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THE ST. PAUL COMPANIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MINNESOTA 001-10898 41-0518860
(State of Incorporation) (Commission File Number) (IRS Employer
Identification Number)
385 WASHINGTON STREET, ST. PAUL, MN 55102
(Address of Principal Executive (Zip Code)
Offices)
(651) 310-7911
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS.
The St. Paul Companies, Inc., a Minnesota corporation ("St. Paul"),
announced today that St. Paul and certain of its subsidiaries have entered into
an agreement for the settlement of all existing and future claims arising out of
any insuring relationship of United States Fidelity and Guaranty Company
("USF&G"), St. Paul Fire and Marine Insurance Company and their affiliates and
subsidiaries, including St. Paul (collectively, the "USF&G Parties") with any of
MacArthur Company, Western MacArthur Company and Western Asbestos Company (the
"MacArthur Companies").
The settlement agreement provides that the MacArthur Companies will
file voluntary petitions under Chapter 11 of the Bankruptcy Code to permit the
channeling of all current and future asbestos-related claims solely to a trust
to be established pursuant to Section 524(g) of the Bankruptcy Code.
Consummation of most elements of the settlement agreement is contingent upon
bankruptcy court approval of the settlement agreement as a part of a broader
plan for the reorganization of the MacArthur Companies (the "Plan"). Approval of
a plan involves substantial uncertainties that include the need to obtain
agreement among existing asbestos plaintiffs, a person to be appointed to
represent the interests of unknown, future asbestos plaintiffs, the MacArthur
Companies and the USF&G Parties as to the terms of such Plan and accordingly,
there can be no assurance that an acceptable Plan will be developed or that
bankruptcy court approval of a Plan will be obtained.
Upon final approval of the Plan, and upon payment by the USF&G Parties
of the amounts described below, the MacArthur Companies will release the USF&G
Parties from any and all asbestos-related claims for personal injury, and all
other claims in excess of $1 million in the aggregate, that may be asserted
relating to or arising from, directly or indirectly, any alleged coverage
provided by any of the USF&G Parties to any of the MacArthur Companies,
including any claim for extra contractual relief.
We believe the after-tax impact on earnings, net of expected
reinsurance recoveries and the revaluation and application of asbestos and
environmental reserves, will be approximately $380 million, based upon payments
of $235 million during the second quarter of 2002, and $740 million on the
earlier of the final, non-appealable approval of the Plan or January 15, 2003,
plus interest on the $740 million from the settlement date to the date of such
payment. The $740 million (plus interest) payment, together with $60 million of
the original $235 million, shall be returned to the USF&G Parties if the Plan is
not finally approved. The settlement agreement also provides for the USF&G
Parties to pay $12.45 million and to advance certain fees and expenses incurred
in connection with the settlement, bankruptcy proceedings, finalization of the
Plan, and efforts to achieve approval of the Plan, subject to a right of
reimbursement in certain circumstances of amounts advanced.
As a result of the settlement, pending litigation with the MacArthur
Companies has been stayed pending final approval of the Plan. Whether or not the
Plan is approved, $175 million of the $235 million will be paid to the
bankruptcy trustee, counsel for the MacArthur Companies, and persons holding
judgments against the MacArthur Companies as of June 3, 2002 and their
counsel, and the USF&G Parties will be released from claims by such holders to
the extent of $110 million paid to such holders.
ITEM 9. REGULATION FD DISCLOSURE.
On June 3, 2002, St. Paul issued the following press release:
MEDIA CONTACT: David Monfried
U.S. Telephone: 651.310.6250
E-mail: david.monfried@stpaul.com
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INVESTOR CONTACT: Laura Gagnon
U.S. Telephone: 651.310.7696
E-mail: laura.gagnon@stpaul.com
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June 03, 2002
For Immediate Release
THE ST. PAUL COMPANIES ENTERS AGREEMENT TO SETTLE WESTERN MACARTHUR CASE;
LITIGATION STAYED
ST. PAUL, Minn. -- The St. Paul Companies (NYSE: SPC) today announced that it
has entered into a definitive agreement to settle all asbestos and all other
claims arising from an insuring relationship that existed prior to 1961 between
Western Asbestos Company, certain assets of which were acquired by Western
MacArthur in 1967, and USF&G Company, which became a St. Paul subsidiary in
1998. As a result of the settlement, the pending litigation has been stayed.
Parties to the settlement include the Western MacArthur entities, Western
Asbestos, as well as representatives of most of the current asbestos claimants
and holders of default judgments against Western MacArthur.
Following a comprehensive review of its known environmental and asbestos
exposures, The St. Paul continues to believe that the Western MacArthur matter
is its only material exposure. The after-tax impact on earnings, net of expected
reinsurance recoveries and the revaluation and application of asbestos and
environmental reserves, will be approximately $380 million.
"This settlement is an important and prudent step toward putting our only known
material asbestos exposure behind us," said Jay Fishman, Chairman and Chief
Executive of The St. Paul. "While it
will have a short-term impact on our earnings, it in no way affects our
fundamental long-term positioning, which continues to be very solid given the
momentum in our businesses."
"The St. Paul's capital position remains strong following this settlement,"
continued Fishman, "and we remain on plan for our capital ratios this year to
strengthen over the year-end 2001 levels. We look forward to concluding our
discussions with the various rating agencies now that the details of this
settlement have been finalized. We will address appropriate capital measures in
the context of both those discussions and our objective of maintaining our
current strong operating outlook."
The settlement agreement provides that the MacArthur entities and Western
Asbestos will file voluntary petitions under Chapter 11 of the Bankruptcy Code,
in order to permit the channeling of asbestos-related claims to a trust
providing both a pool of funds and a mechanism for the definitive and final
resolution of all existing and future claims. The litigation will be dismissed
upon final approval of the Bankruptcy Plan. The St. Paul will make payments of
$235 million into escrow preceding the creation of the trust during the second
quarter of 2002, and $740 million, on the earlier of the final, non-appealable
approval of a plan of reorganization of Western MacArthur and January 15, 2003,
plus interest from the settlement date to the date of the payment. The St. Paul
also will pay an additional $12.5 million in fees and costs, and will advance
certain fees in the bankruptcy proceeding that The St. Paul expects to be
refunded. Whether or not the Plan is approved, $175 million of the $235 million
will be paid to compensate persons holding judgments against Western MacArthur
and to cover administrative costs relating to the bankruptcy. All payments
related to the settlement will be funded from current liquid assets.
"The settlement underscores changes that have taken place in the Western
MacArthur litigation over a very short period of time. Our claim team has worked
very hard to assess this matter and bring it to a resolution, which, when
completed, will protect our shareholders from future liability. A case-by-case,
detailed review of our asbestos and environmental claims indicates that this is
the only material case we face, placing us in a good position with respect to
these issues moving forward," continued Fishman. "Although asbestos and
environmental losses are inherently difficult to predict, based on our
case-by-case review and all other information currently available, our aggregate
asbestos and environmental reserves represent our best estimate of our ultimate
liability for these losses."
The company said its aggregate net reserves for asbestos and environmental were
$852 million as of March 31, 2002, a subset of its total net reserves of $15
billion.
The company will hold a conference call at 5:30 p.m. EDT today, Monday, June 3.
The call will be web-cast via The St. Paul's website (www.stpaul.com) or
available by dialing 913.981.5549. Participants should dial into the conference
call 10-15 minutes prior to the scheduled start. A replay will be available on
the company's website through June 10 or by dialing 719.457.0820, replay access
code 665861, from 9:30 p.m. this evening through June 10.
The St. Paul Companies, headquartered in Saint Paul, Minn., USA, provides
commercial property-liability insurance and asset management services. The St.
Paul reported 2001 revenues from continuing operations of $8.9 billion and total
assets of $38.3 billion. For more information about The St. Paul and its
products and services, visit the company'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; 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; 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; changes in our
estimate of insurance industry losses resulting from the September 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; changes in domestic and foreign laws,
regulations and taxes; 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.
PURSUANT TO GENERAL INSTRUCTION B(2) TO FORM 8-K, THE INFORMATION
FURNISHED IN THIS ITEM 9 SHALL NOT BE DEEMED TO "FILED" FOR THE PURPOSES OF
SECTION 18 OF THE SECURITIES EXCHANGE ACT OF 1934 OR OTHERWISE SUBJECT TO THE
LIABILITIES OF THAT SECTION AND SHALL NOT BE DEEMED TO BE INCORPORATED BY
REFERENCE IN ANY OTHER FILING UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
EXCHANGE ACT UNLESS THE REGISTRANT SPECIFICALLY INCORPORATES THIS ITEM IN A
FILING UNDER EITHER OF SUCH ACTS.
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 hereunto duly authorized.
THE ST. PAUL COMPANIES, INC.
By: /s/ Bruce A. Backberg
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Name: Bruce A. Backberg
Title: Senior Vice President
Date: June 3, 2002