01—Abstract
Summary
Summary of the 10-K filed March 28, 2001. Cited figures are marked; the original filing is the authoritative source.
The St. Paul Companies, Inc. (now Travelers Companies, Inc.) reported 2000 net income of $993 milliona, or $4.24 per diluted share, up from $834 million ($3.41) in 1999.
Pretax income from continuing operations rose to $1.453 billionb from $1.017 billion. The company stated that the growth was centered in property-liability insurance, driven primarily by a $330 million increase in realized investment gains and improved underwriting results, which benefited from aggregate excess-of-loss reinsurance treaties worth $357 million pretax in 2000 and $261 million in 1999. Management described a pricing environment that improved in nearly all market sectors during 2000, with written premiums excluding the treaties of $6.36 billion, versus $5.38 billion in 1999.
The combined ratio improved to 104.8 from 107.9, and the loss ratio improved to 70.0 from 72.9. The company made several acquisitions in 2000, including MMI Companies for about $206 millionc in cash plus $165 million of assumed debt and capital securities, and Pacific Select for about $37 million. It sold its nonstandard auto operations to Prudential for $175 million net.
It repurchased about 18 million shares for $536 milliond, and it reported total shareholders' equity of $7.227 billion. Management said the Global Healthcare segment deteriorated sharply, with a 2000 underwriting loss of $286 million, and that it was reviewing the recoverability of goodwill from the MMI purchase, for which it could not yet estimate any impairment. Management also reported that the Weavers reinsurance matter could materially affect results if adverse.
For investors, the key points are the strong earnings and capital return in 2000, the reliance on realized investment gains, and the unresolved goodwill and healthcare underwriting risks. The company also disclosed that its CFO, Paul J. Liska, would resign effective April 1, 2001.
02—Key points
Key Highlights
- Net income of $993 million ($4.24 diluted EPS) in 2000, up from $834 million ($3.41) in 1999
- Pretax income from continuing operations of $1.453 billion, up from $1.017 billion, driven mainly by a $330 million increase in realized investment gains
- Statutory combined ratio improved to 104.8 from 107.9; loss ratio improved to 70.0 from 72.9
- Aggregate excess-of-loss reinsurance treaties contributed a net pretax benefit of $357 million in 2000 versus $261 million in 1999
- Acquired MMI Companies (about $206 million cash plus $165 million assumed debt and capital securities) and Pacific Select (about $37 million); sold nonstandard auto operations to Prudential for $175 million net
- Repurchased and retired about 18 million common shares for $536 million; common shareholders' equity reached $7.178 billion
- Global Healthcare underwriting loss of $286 million; goodwill from the MMI purchase under review, with impairment not yet estimable
03—Questions
Frequently Asked Questions
What drove the increase in pretax income in 2000?
The filing states that growth in pretax income from continuing operations was centered in property-liability insurance and was primarily due to a $330 million increase in realized investment gains and improved underwriting results in several business segments. Pricing improved in nearly all market sectors in 2000 after several years of intense competitive pressure.
How much did the reinsurance treaties affect reported results?
The aggregate excess-of-loss reinsurance treaties produced a combined net pretax benefit of $357 million in 2000 and $261 million in 1999. Excluding these benefits, 2000 underwriting loss of $666 million was slightly better than the 1999 loss of $686 million.
Which business segment had the largest underwriting problems?
The Global Healthcare segment recorded a GAAP underwriting loss of $286 million in 2000, driven by losses in its long-term care and major accounts books, including business acquired from MMI. The filing says that severe prior-year development on MMI's major accounts business contributed to the results.
What are the open risks around goodwill and legal matters?
The company said it is performing a comprehensive review of its major accounts healthcare business and the strategic value of Unionamerica, and it cannot yet estimate whether any MMI goodwill impairment has occurred. Separately, it disclosed the Weavers reinsurance matter, which it said could materially affect results in the period of an adverse outcome, though not its liquidity or overall financial position.
What management changes were announced?
Effective April 1, 2001, Paul J. Liska would resign as Executive Vice President and Chief Financial Officer. Thomas A. Bradley, Senior Vice President - Finance, would become Chief Financial Officer, and Michael R. Wright was named Chief Investment Officer.
04—Continue