Summary
The St. Paul Companies, Inc. has completed the transfer of its continuing reinsurance business and related assets to a newly formed entity, Platinum Underwriters Holdings, Ltd. This transaction involves the contribution of $122 million in cash and approximately $350 million in assets related to transferred insurance reserves to Platinum. In exchange, St. Paul received a 14% ownership stake in Platinum, consisting of six million common shares, and a ten-year option to acquire an additional six million shares at a set price. While St. Paul expects a pre-tax gain from this divestiture, it anticipates an after-tax loss primarily due to the ongoing evaluation of deferred tax assets associated with retained reinsurance liabilities. Investors should note that this transaction significantly restructures St. Paul's reinsurance operations, with potential future impacts dependent on the performance of Platinum and the resolution of deferred tax asset recoverability. The company cautions that actual results may differ from forward-looking statements due to various risks and uncertainties.
Key Highlights
- 1Completion of transfer of continuing reinsurance business and related assets to Platinum Underwriters Holdings, Ltd.
- 2St. Paul contributed $122 million cash and $350 million in assets related to reserves to Platinum.
- 3St. Paul acquired a 14% ownership stake (6 million shares) in Platinum.
- 4St. Paul obtained a ten-year option to purchase up to 6 million additional Platinum shares at $27 per share.
- 5St. Paul retains reinsurance liabilities primarily for contracts issued before January 1, 2002.
- 6Expected pre-tax gain of $18 million to $20 million.
- 7Estimated after-tax loss of $40 million to $60 million due to deferred tax asset evaluation.