St. Paul earnings sink 36%

More job cuts expected, CEO says

Insurance

January 30, 1999|By BLOOMBERG NEWS

ST. PAUL, Minn. -- St. Paul Cos., the ninth-largest U.S. property and casualty insurer, said fourth-quarter earnings fell 36 percent amid a decline in prices of insurance for businesses.

Profit from operations, excluding gains from investment sales and special charges, fell to $133.5 million, or 53 cents a share, from $206.9 million, or 82 cents, in the same quarter of 1997. Earnings matched the average estimate, according to a survey of analysts by First Call Corp. Forecasts ranged from 46 cents to 62 cents.

St. Paul's net written premiums fell 2.4 percent to $1.57 billion from $1.61 billion in the year-earlier quarter. Insurers competing for business have kept a lid on prices in recent years, putting pressure on premiums across the industry.

St. Paul shares fell 6.25 cents yesterday to close at $29.375. The stock has fallen 33 percent in the past 12 months.

St. Paul's combined ratio, a measure of its claims and expenses vs. premiums, rose to 110.7 in the fourth quarter from 103.8 a year earlier. The higher a company's combined ratio, the less profitable its underwriting is.

The insurer began cutting costs and scrutinizing its policies last year in an effort to boost profit. Chairman and Chief Executive Officer Douglas Leatherdale said he's prepared to lose $250 million of business if it means higher profit.

Leatherdale also said St. Paul expects to have cut annual costs by $250 million at the end of this year, after its $3.7 billion purchase of Baltimore-based USF&G Corp. last year. The company is cutting its staff by as much as 2,600 by the end of this year.

"They have a major challenge, and the management will be tested by this," said William Dyer Jr., fund manager at Century Capital Management Inc., which oversees about $1 billion in assets. "We believe they're going to come out the other side being better off than they were before."

Net income, including a $7.2 million loss on investments and $22.3 million spent on firing workers and closing facilities, fell 59 percent to $104 million, or 41 cents a share. In the fourth quarter of 1997, $48.9 million of investment gains contributed to net income of $255.8 million, or $1.01 a share.

St. Paul had 1998 profit from operations of $397.2 million, or $1.61 a share, down 47 percent from $742.9 million, or $2.95 a share, in 1997.

Net income was $65.2 million, or 22 cents a share. That included $457.5 million in merger-related charges and $147.8 million in gains on securities sales. In 1997, net income was $929.3 million, or $3.69, including $254.2 million in realized gains.

Pub Date: 1/30/99

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