SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
---- EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
Commission file number 0-3021
THE ST. PAUL COMPANIES, INC.
(Exact name of Registrant as specified in its charter)
Minnesota 41-0518860
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
385 Washington Street, Saint Paul, MN 55102
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code 612-310-7911
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Securities registered pursuant to Section 12(b) of the Act:
Common Stock (without par value) New York Stock Exchange
London Stock Exchange
Stock Purchase Rights New York Stock Exchange
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(Title of class) (Name of each exchange on which
registered)
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Securities registered pursuant to Section 12(g) of the Act:
None.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (X)
The aggregate market value of the outstanding Common Stock held by nonaffiliates of the Registrant on March 23, 1998, was $7,575,147,530. The number of shares of the Registrant's Common Stock, without par value, outstanding at March 23, 1998, was 84,021,148.
An Exhibit Index is set forth at page 36 of this report.
Page 1 of 36 pages
General Description
The St. Paul Companies, Inc. (The St. Paul) is incorporated as a general business corporation under the laws of the State of Minnesota. The St. Paul and its subsidiaries comprise one of the oldest insurance organizations in the United States, dating back to 1853. The St. Paul is a management company principally engaged, through its subsidiaries, in property-liability insurance and reinsurance underwriting. The St. Paul also has a presence in the asset management-investment banking industry through its majority ownership of The John Nuveen Company. As a management company, The St. Paul oversees the operations of its subsidiaries and provides them with capital, management and administrative services. According to "Fortune" magazine's most recent rankings, The St. Paul was the 238th-largest U.S. corporation, based on total 1996 revenues. At March 23, 1998, The St. Paul and its subsidiaries employed approximately 10,000 persons.
In January 1998, The St. Paul and USF&G Corporation (USF&G) announced a proposed merger of the two companies, which, if completed, would create the eighth-largest property-liability insurance company in the United States, based on 1996 net written premium volume. The merger, which is subject to approvals by both companies' shareholders and various regulatory authorities, would be a tax-free exchange of stock accounted for as a pooling of interests. The merger would result in USF&G becoming a wholly- owned subsidiary of The St. Paul. Both companies have scheduled separate special shareholder meetings for April 7, 1998 to vote on resolutions relating to the proposed merger. The combined company will operate under The St. Paul name and remain based in Saint Paul, Minn. The merger is expected to be consummated in the second quarter of 1998.
Under the terms of the merger agreement, USF&G shareholders will receive shares of The St. Paul's common stock having a value to be determined according to an exchange ratio based on the average price of The St. Paul's stock during a twenty-day period ending on the third day prior to the USF&G shareholder meeting to vote on the proposed merger. The total value of the transaction is expected to be approximately $3.5 billion, which includes the assumption of USF&G's debt and capital securities. Note 18 to The St. Paul's consolidated financial statements, which is included in The St. Paul's Form 8-K Current Report dated Feb. 26, 1998, contains additional information about the proposed merger and is incorporated herein by reference.
In May 1997, The St. Paul completed the sale of its brokerage operation, Minet, to Aon Corporation (Aon). Gross proceeds from the sale were approximately equal to the remaining carrying value of Minet at the date of sale. The St. Paul agreed to indemnify Aon against most of Minet's preclosing liabilities. The St. Paul recorded a $68 million after-tax loss on disposal of Minet in 1997, resulting primarily from commitments for certain severance, employee benefits, future lease commitments and other costs related to Minet. Note 12 to The St. Paul's consolidated financial statements, which is included in The St. Paul's Form 8-K Current Report dated Feb. 26, 1998, contains additional information relating to the Minet sale and is incorporated herein by reference.
Business Segments
The St. Paul's insurance underwriting operations, composed of six distinct underwriting business segments and an investment operations segment, accounted for at least 95% of consolidated revenues from continuing operations in each of the years 1997, 1996 and 1995. The asset management-investment banking segment and parent company accounted for the remaining revenues in each of those years. Financial information about The St. Paul's business segments is set forth in Note 16 to The St. Paul's consolidated financial statements included in the Form 8-K Current Report dated Feb. 26, 1998, and is incorporated herein by reference.
The following table summarizes the sources of The St. Paul's consolidated revenues from continuing operations for each of the last three years. Following the table is a narrative description of each of The St. Paul's business segments as they existed at the date of this report. The descriptions do not reflect the anticipated impact of the proposed merger with USF&G Corporation on The St. Paul's business segments, because the merger had not been approved or consummated at the date of this report.
Percentage of
Consolidated Revenues
1997 1996 1995
---- ---- ----
Underwriting:
Worldwide Insurance Operations
St. Paul Fire and Marine:
Specialized Commercial 20.8% 22.2% 24.3%
Commercial 15.5 15.0 11.6
Personal Insurance 12.0 12.4 13.0
Medical Services 9.6 10.5 12.0
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Total Fire and Marine 57.9 60.1 60.9
St. Paul International Underwriting 4.4 4.6 4.7
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Total Worldwide Insurance Operations 62.3 64.7 65.6
St. Paul Re 12.0 12.8 13.0
Investment Operations:
Net investment income 14.2 13.9 14.5
Realized investment gains 6.4 3.6 1.5
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Total Investment Operations 20.6 17.5 16.0
Other 0.6 0.8 0.6
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Total Underwriting 95.5 95.8 95.2
Asset management-investment banking 4.3 4.1 4.7
Parent company and elimations 0.2 0.1 0.1
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Total 100.0% 100.0% 100.0%
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NARRATIVE DESCRIPTION OF BUSINESS
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Underwriting Operations
The St. Paul's primary insurance underwriting business is conducted through its Worldwide Insurance Operations, which include St. Paul Fire and Marine (Fire and Marine) and St. Paul International Underwriting (International). Fire and Marine, The St. Paul's U.S. insurance operation, underwrites property and liability insurance and provides insurance-related products and services to commercial, professional and individual customers throughout the United States. International underwrites primary property and liability insurance coverages outside the United States. International also includes insurance written for foreign exposures of U.S.-based corporations and U.S. exposures of foreign-based companies. The St. Paul's reinsurance business operates under the name St. Paul Re, which underwrites reinsurance for leading property-liability insurance companies worldwide.
The primary sources of the underwriting operations' revenues are premiums earned from insurance policies and reinsurance contracts, income earned from the investment portfolio and sales of investments. According to the most recent industry statistics published in "Best's Review" with respect to property-liability insurers doing business in the United States, The St. Paul's underwriting operations ranked 13th on the basis of 1996 written premiums.
Principal Departments and Products. The "Underwriting Results by Segment" table included in the 8-K Current Report dated Feb. 26, 1998, which summarizes written premiums, underwriting results and combined ratios for each of its underwriting segments for the last three years, is incorporated herein by reference. The following discussion summarizes the business structure of The St. Paul's insurance underwriting operations.
WORLDWIDE INSURANCE OPERATIONS
St. Paul Fire and Marine
Fire and Marine underwrites insurance through the following business segments:
Specialized Commercial. This is the largest of Fire and Marine's operations, based on written premium volume. Specialized Commercial includes a number of individual underwriting operations which serve specific commercial customer segments or provide specialized products and services for targeted industry groups. Specialized Commercial, in general, provides coverage for damage to the customer's property (fire, inland marine and auto), liability for bodily injury or damage to the property of others (general liability, auto liability and excess), workers' compensation insurance, and various professional liability coverages.
Operations serving specific customer segments consist of the following: Financial and Professional Services provides fidelity and property-liability coverages for depository institutions, and markets errors and omissions coverages for lawyers, insurance agents and other nonmedical professionals, including directors and officers. Ocean Marine provides a variety of property-liability insurance related to ocean and inland waterways traffic, including cargo and hull property protection. Public Sector Services markets insurance products and services, including professional liability insurance, to all levels of government entities. Surplus Lines underwrites products liability insurance, umbrella and excess liability coverages, property insurance for high-risk classes of business, and coverages for unique, sometimes one-of-a-kind risks. Technology underwrites a range of specialized coverages for information technology firms, including manufacturers of electronics, synthetics, industrial machinery and medical equipment.
The following operations provide products and services for targeted industry groups. Construction provides insurance to medium- and large-size general building contractors, highway contractors and specialty contractors. Large construction projects are insured during the life of the project. Surety underwrites surety bonds, primarily for construction contractors, which guarantee that third parties will be indemnified against the nonperformance of contractual obligations. Based on 1996 written premiums, Fire and Marine's surety operation ranked as the sixth-largest underwriter of surety bonds in the United States. Manufacturing provides liability insurance and risk management products and services for large manufacturing operations. Service Industries provides large service-related businesses with insurance and risk management programs. Businesses served include retailers, wholesalers, insurance companies, and hospitality and entertainment firms. Special Property underwrites large property accounts, layered and excess property programs, large deductible accounts, stop-loss and loss limit programs and other customized property business. National Programs underwrites coverages for nationwide, multiple- policyholder programs through a single agency source. Transportation provides large motor carriers with customized insurance programs.
Fire and Marine's limited participation in insurance pools and associations, which provide specialized underwriting skills and risk management services for the classes of business that they write, is also included in Specialized Commercial results. These pools and associations serve to increase the underwriting capacity of participating companies for insurance policies where the concentration of risk is so high or the amount so large that a single company could not prudently accept the entire risk.
Commercial. Fire and Marine's Commercial underwriting operation offers property-liability insurance to a broad range of small to midsized commercial enterprises. Business coverages marketed include package, general liability, umbrella and excess liability, commercial auto and fire, inland marine and workers' compensation. Commercial offers tailored coverages and insurance products for specific customer groups such as golf courses, museums, colleges and schools, multipurpose recreational facilities, manufacturers, wholesalers and processors. Coverages marketed to the small commercial customer include the Package Accounts for Commercial Enterprises (PACE) policy for individuals, groups or franchise operations, including offices, retailers and family restaurants.
In July 1996, Fire and Marine acquired Northbrook Holdings, Inc. and its three commercial underwriting subsidiaries (Northbrook) from Allstate Insurance Company. Northbrook underwrites various property-liability commercial insurance coverages throughout the United States. Northbrook accounted for $230 million and $140 million of written premiums in Fire and Marine's Commercial operations in 1997 and 1996, respectively.
Personal Insurance. This operation provides a broad portfolio of property-liability insurance products and services for individuals. Through a variety of single-line policies and multi-line package policies, individuals can acquire coverages to protect personal property such as homes, automobiles and boats, as well as to provide coverage for personal liability.
Medical Services. Medical Services underwrites professional liability, property and general liability insurance for the health care delivery system. Products include coverages for health care professionals (physicians and surgeons, dental professionals and nurses); individual health care facilities (including hospitals, long-term care facilities and other facilities such as laboratories); and entire systems such as hospital networks and managed care systems. Specialized claim and loss control services are vital components of Medical Services' insurance products and services. Fire and Marine is the largest medical liability insurer in the United States, with premium volume accounting for approximately 8% of the U.S. market in 1996 based on premium data published in "Best's Review."
St. Paul International Underwriting
St. Paul International Underwriting includes most primary insurance written outside the United States. International has a domestic presence as a licensed insurance company in Canada, and ten countries in Europe, Africa and Latin America. It also includes The St. Paul's participation in Lloyd's of London as a provider of capital to selected underwriting syndicates and as the owner of two managing agencies. International also includes insurance written for foreign operations of multinational corporations based in the United States, and insurance written to cover exposures in the United States for foreign-based companies. This operation offers a broad range of commercial and personal lines products and services tailored to meet the unique needs of both its multinational customers as well as its customers in each of the indigenous markets which it serves.
ST. PAUL RE
St. Paul Re underwrites reinsurance in both domestic and international insurance markets (referred to as "assumed reinsurance"). Reinsurance is an agreement through which one insurance company will transfer some of the risk it has underwritten to another insurer and will pay a premium in order to do so. A large portion of reinsurance is effected automatically under general reinsurance contracts known as treaties. In some instances, reinsurance is effected by negotiation on individual risks, which is referred to as facultative reinsurance. St. Paul Re underwrites both treaty and facultative reinsurance for property, liability, ocean marine, surety and several specialty coverages. According to data published by the Reinsurance Association of America, St. Paul Re ranked as the eighth-largest U.S. reinsurance underwriter based on written premium volume for the first nine months of 1997.
In 1996, The St. Paul completed a $68.5 million securitized reinsurance transaction that provided St. Paul Re with property catastrophe reinsurance capacity of $45.1 million for up to three years and up to $21.1 million in the subsequent seven years. A newly-formed single-purpose reinsurance company called George Town Re was organized to reinsure only St. Paul Re. Collateral for claims is provided from the proceeds raised in a private placement. This reinsurance allows St. Paul Re to write more catastrophe- exposed property business without having to seek additional capital and without any impact on The St. Paul's consolidated balance sheet. St. Paul Re utilized a portion of this securitized reinsurance capacity in 1997.
In January 1997, St. Paul Re acquired the right to renew Constitution Reinsurance Corporation's approximately $20 million book of U.S. casualty facultative reinsurance business.
Principal Markets and Methods of Distribution. St. Paul Fire and Marine Insurance Company and its subsidiaries are licensed and transact business in all 50 states, the District of Columbia, Puerto Rico and the Virgin Islands. Fire and Marine's business is broadly distributed throughout the United States, with a particularly strong market presence in the Midwestern region. Five percent or more of Fire and Marine's 1997 property-liability written premiums were produced in each of Illinois, California, Minnesota, New York and Texas.
Fire and Marine's business is produced primarily through approximately 6,000 independent insurance agencies and insurance brokers. Fire and Marine maintains 12 regional offices in major cities throughout the United States and 90 additional service offices in the United States to respond to the needs of agents, brokers and policyholders.
St. Paul Re produces business from its New York headquarters, as well as from its offices in London, Miami, Chicago, Atlanta, Philadelphia, Brussels, Munich, Singapore, Tokyo and Sydney. St. Paul Re obtains business primarily through the broker or intermediary market. Approximately 40% of St. Paul Re's business in 1997 originated from outside the United States.
St. Paul International Underwriting is headquartered in London and underwrites insurance through local operations in 11 markets outside the United States (South Africa, Botswana, Argentina, Mexico, Canada, the Netherlands, the Republic of Ireland, Spain, France, Germany and the United Kingdom).
A portion of The St. Paul's property-liability insurance written premium volume originates with insurance brokers. In 1997, approximately 18% of The St. Paul's underwriting operations' gross written premium volume originated with two brokerage firms - Aon Corporation, and J&H Marsh & McLennan, Inc.
Reserves for Losses and Loss Adjustment Expenses
General Information. When claims are made by or against policyholders, any amounts that The St. Paul's underwriting operations pay or expect to pay to the claimant are referred to as losses. The costs of investigating, resolving and processing these claims are referred to as loss adjustment expenses (LAE). The St. Paul establishes reserves that reflect the estimated unpaid total cost of these two items. The reserves for unpaid losses and LAE at Dec. 31, 1997 cover claims that were incurred not only in 1997 but also in prior years. They include estimates of the total cost of claims that have already been reported but not yet settled ("case" reserves), and those that have been incurred but not yet reported ("IBNR" reserves). Loss reserves are not discounted, but they are reduced for estimates of salvage and subrogation.
Management continually reviews loss reserves, using a variety of statistical and actuarial techniques to analyze current claim costs, frequency and severity data, and prevailing economic, social and legal factors. Management believes that the reserves currently established for losses and LAE are adequate to cover their eventual costs. However, final claim payments may differ from these reserves, particularly when these payments may not take place for several years. Reserves established in prior years are adjusted as loss experience develops and new information becomes available. Adjustments to previously estimated reserves are reflected in results in the year in which they are made.
Ten-year Development. The table on page 9 presents a development of net loss and LAE reserve liabilities and payments for the years 1987 through 1997. The top line on the table shows the estimated liability for unpaid losses and LAE, net of reinsurance recoverable, recorded at the balance sheet date for each of the years indicated. Loss development data for The St. Paul's U.K.- based reinsurance and international underwriting operations are included in the table from 1988 to 1997.
In 1997, The St. Paul changed the method by which it assigns loss activity to a particular year for assumed reinsurance written by its U.K.-based reinsurance operation. Prior to 1997, that loss activity was assigned to the year in which the underlying reinsurance contract was written. In 1997, The St. Paul's analysis indicated that an excess amount of loss activity was being assigned to prior years because of this practice. As a result, The St. Paul implemented an improved procedure in 1997 that more accurately assigns loss activity for this business to the year in which it occurred. This change had the impact of increasing favorable development on previously established reserves by approximately $110 million in 1997. There was no net impact on total incurred losses, however, because there was a corresponding increase in the provision for current year loss activity in 1997. Development data for individual years prior to 1997 in this table were not restated to reflect this new procedure because reliable data to do so was not available.
The upper portion of the table, which shows the re-estimated amount relating to the previously recorded liability, is based upon experience as of the end of each succeeding year. This estimate is either increased or decreased as further information becomes known about individual claims and as changes in the trend of claim frequency and severity become apparent.
The "Cumulative redundancy" line on the table for any given year represents the aggregate change in the estimates for all years subsequent to the year the reserves were initially established. For example, the 1987 reserve of $4,745 million developed to $4,727 million, or an $18 million redundancy, by the end of 1988. By the end of 1997, the 1987 reserve had developed a redundancy of $512 million. The changes in the estimate of 1987 loss reserves were reflected in operations during the past ten years.
In 1993, The St. Paul adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 113, "Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts." This statement required, among other things, that reinsurance recoverables on unpaid losses and LAE be shown as an asset, instead of the prior practice of netting this amount against insurance reserves for balance sheet reporting purposes.
The middle portion of the table, which includes data for only those periods impacted since the adoption of SFAS No. 113 (the years 1992 through 1997), represents a reconciliation between the net reserve liability as shown on the top line of the table and the gross reserve liability as shown on The St. Paul's balance sheet. This portion of the table also presents the gross re-estimated reserve liability as of the end of the latest re-estimation period (Dec. 31, 1997) and the related re-estimated reinsurance recoverable. The St. Paul did not restate data for years prior to 1992 in this table for presentation on a gross basis due to the impracticality of determining such gross data on a reliable basis for its foreign underwriting operations.
The lower portion of the table presents the cumulative amounts paid with respect to the previously recorded liability as of the end of each succeeding year. For example, as of Dec. 31, 1997, $3,814 million of the currently estimated $4,233 million of losses and LAE that have been incurred for the years up to and including 1987 have been paid. Thus, as of Dec. 31, 1997, it is estimated that $419 million of incurred losses and LAE have yet to be paid for the years up to and including 1987.
Caution should be exercised in evaluating the information shown on this table. It should be noted that each amount includes the effects of all changes in amounts for prior periods. For example, the portion of the development shown for year-end 1995 reserves that relates to 1987 losses is included in the cumulative redundancy for the years 1987 through 1995.
In addition, the table presents calendar year data. It does not present accident or policy year development data, which some readers may be more accustomed to analyzing. The social, economic and legal conditions and other trends which have had an impact on the changes in the estimated liability in the past are not necessarily indicative of the future. Accordingly, readers are cautioned against extrapolating any conclusions about future results from the information presented in this table.
Note 6 to The St. Paul's consolidated financial statements, which
is included in the Form 8-K Current Report dated Feb. 26, 1998,
includes a reconciliation of beginning and ending loss reserve
liabilities for each of the last three years and is incorporated
herein by reference. Additional information about The St. Paul's
reserves is contained in the "Loss and Loss Adjustment Expense
Reserves" and "Environmental and Asbestos Claims" sections of
"Management's Discussion and Analysis." Those sections are also
included in The St. Paul's Form 8-K Current Report dated Feb. 26, 1998,
and are incorporated herein by reference.
Analysis of Loss and Loss Adjustment Expense (LAE) Development
(in millions)
Year ended December 31 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
---------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net liability for
unpaid losses and LAE $4,745 5,502 5,907 6,279 6,688 7,207 7,640 7,890 8,393 9,783 9,925
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Liability re-estimated
as of:
One year later 4,727 5,313 5,656 6,037 6,436 6,984 7,312 7,642 8,141 9,295
Two years later 4,489 4,914 5,338 5,787 6,259 6,704 7,027 7,330 7,672
Three years later 4,268 4,789 5,135 5,628 6,066 6,563 6,781 6,905
Four years later 4,226 4,731 5,027 5,490 6,063 6,384 6,426
Five years later 4,178 4,707 4,975 5,521 5,960 6,155
Six years later 4,180 4,682 5,058 5,472 5,814
Seven years later 4,169 4,796 5,038 5,407
Eight years later 4,163 4,798 5,013
Nine years later 4,183 4,826
Ten years later 4,233
Cumulative redundancy $512 676 894 872 874 1,052 1,214 985 721 488
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Cumulative redundancy
excluding foreign
exchange (1) $512 686 874 872 881 1,045 1,209 984 714 489
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Net liability for
unpaid losses and LAE 7,207 7,640 7,890 8,393 9,783 9,925
Reinsurance recoverable on
unpaid losses 1,606 1,545 1,533 1,854 1,890 1,893
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Gross liability 8,813 9,185 9,423 10,247 11,673 11,818
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Gross re-estimated liability:
One year later 8,692 8,842 9,599 9,980 11,262
Two years later 8,389 8,934 9,274 9,295
Three years later 8,622 8,665 8,681
Four years later 8,426 8,178
Five years later 8,092
Gross cumulative
redundancy 721 1,007 742 952 411
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Gross cumulative
redundancy excluding
foreign exchange (1) 680 980 702 934 410
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Cumulative amount of net
liability paid through:
One year later $1,101 1,196 1,318 1,450 1,452 1,547 1,566 1,591 1,839 2,228
Two years later 1,884 2,044 2,209 2,361 2,493 2,576 2,608 2,751 3,084
Three years later 2,466 2,646 2,797 3,015 3,155 3,245 3,373 3,543
Four years later 2,869 3,043 3,216 3,442 3,584 3,745 3,881
Five years later 3,132 3,348 3,496 3,713 3,922 4,090
Six years later 3,322 3,554 3,674 3,942 4,178
Seven years later 3,453 3,691 3,846 4,137
Eight years later 3,573 3,819 4,002
Nine years later 3,666 3,975
Ten years later 3,814
Cumulative amount of
gross liability paid
through:
One year later 1,935 1,872 1,958 2,160 2,532
Two years later 3,199 3,136 3,352 3,377
Three years later 4,047 4,065 4,129
Four years later 4,678 4,563
Five years later 5,018
(1) The results of The St. Paul's U.K.-based operations
translated from original currencies into U.S. dollars are
included with The St. Paul's U.S. underwriting operations in
this table from 1988 to 1997. The foreign currency
translation impact on the cumulative redundancy arises from
the difference between reserve developments translated at
the exchange rates at the end of the year in which the
liabilities were originally estimated, and the exchange
rates at the end of the year in which the liabilities were
re-estimated.
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Ceded Reinsurance. Through ceded reinsurance, other insurers and reinsurers agree to share certain risks that The St. Paul's subsidiaries have underwritten. The purpose of reinsurance is to limit a ceding insurer's maximum net loss arising from large risks or catastrophes. Reinsurance also serves to increase the direct writing capacity of the ceding insurer. Amounts recoverable on ceded losses are recorded as an asset.
With respect to ceded reinsurance, The St. Paul strives to protect its assets from large individual risk and occurrence losses, and provide its respective underwriting operations with the capacity necessary to write large limits on accounts.
The collectibility of reinsurance is subject to the solvency of reinsurers. The St. Paul's Reinsurance Security Committee, which has established financial standards to determine qualified, financially secure reinsurers, guides the placement of ceded reinsurance. Uncollectible reinsurance recoverables have not had a material adverse impact on The St. Paul's results of operations, liquidity or financial position. Note 14 to The St. Paul's consolidated financial statements, which is included in the Form 8- K Current Report dated Feb. 26, 1998, provides a schedule of ceded reinsurance information and is incorporated herein by reference.
INVESTMENT OPERATIONS
Objectives. The St. Paul's board of directors approves the annual investment plans of the underwriting subsidiaries. The primary objectives of those plans are as follows:
1) to maintain a widely diversified fixed maturities portfolio structured to maximize investment income while minimizing credit risk through investments in high-quality instruments;
2) to provide for long-term growth in the market value of the investment portfolio and enhance shareholder value through investments in certain other investment classes, such as equity securities, venture capital and real estate.
The St. Paul has had limited involvement with derivative financial instruments for purposes of hedging against fluctuations in interest rates. The St. Paul has not participated in the derivatives market for trading or speculative purposes.
Fixed Maturities. Fixed maturities constituted 85% of The St. Paul's underwriting operations' investment portfolio at Dec. 31, 1997. The portfolio is primarily composed of high-quality, intermediate-term taxable U.S. government agency and corporate bonds and tax-exempt U.S. municipal bonds. The following table presents information about the fixed maturities portfolio for the last five years (dollars in millions).
Weighted Weighted
Amortized Market Pretax Net Average Average
Cost at Value at Investment Pretax After-tax
Year Year-end Year-end Income Yield Yield
---- -------- -------- ---------- -------- --------
1997 $11,745.2 $12,414.3 $812.9 7.1% 5.4%
1996 11,425.5 11,908.2 740.4 7.0% 5.4%
1995 9,712.7 10,394.5 671.9 7.2% 5.6%
1994 9,015.4 8,938.2 637.2 7.4% 5.7%
1993 8,490.8 9,249.3 618.1 7.4% 5.9%
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The St. Paul determines the mix of its investments in taxable and tax-exempt securities based on its current and projected tax position and the relationship between taxable and tax-exempt investment yields. Fixed maturity purchases in 1997 consisted of intermediate-term, investment-grade taxable and tax-exempt securities. The fixed maturities portfolio is carried on The St. Paul's balance sheet at estimated market value, with unrealized appreciation and depreciation (net of taxes) recorded in common shareholders' equity. At Dec. 31, 1997, pretax unrealized appreciation totaled $669 million.
The fixed maturities portfolio is managed conservatively to provide reasonable returns while limiting exposure to risks. Approximately 96% of the fixed maturities portfolio is rated at investment grade levels (BBB or better). Nonrated securities comprise the remainder of the portfolio. Most of these are nonrated municipal bonds which, in management's view, would be considered of investment- grade quality if rated.
Equities. Equity securities comprised 5% of the underwriting operations' investments at Dec. 31, 1997, and consist of a diversified portfolio of common stocks, which are held with the primary objective of achieving capital appreciation. Sales of equities generated $155 million of pretax realized investment gains in 1997, and dividend income totaled $15 million. The portfolio's carrying value at year-end included $232 million of unrealized appreciation.
Real Estate. The St. Paul's real estate holdings, which comprised 5% of total investments at Dec. 31, 1997, consist of a diversified portfolio of commercial office and warehouse properties that The St. Paul owns directly or has partial interest in through joint ventures. The properties are geographically distributed throughout the United States. This portfolio produced $44 million of pretax investment income in 1997, and sales of real estate investments in 1997 generated $35 million of pretax realized gains. The St. Paul does not have a portfolio of real estate mortgage investments, but included in debt outstanding are two mortgages totaling $15 million on two of its warehouse properties.
Venture Capital. Securities of small to medium sized companies spanning a variety of industries comprise The St. Paul's venture capital investments, which accounted for 2% of total investments at Dec. 31, 1997. These investments are in the form of limited partnership interests or direct equity investments. Sales of venture capital investments in 1997 generated pretax realized investment gains of $213 million. This included a gain of $129 million on the sale of the stock of Advanced Fibre Communications, Inc., a direct equity investment. The carrying value of venture capital investments at Dec. 31, 1997 included $138 million of unrealized appreciation.
Other Investments. The St. Paul's portfolio also includes short- term securities and other miscellaneous investments, which in the aggregate comprised 3% of total investments at Dec. 31, 1997.
Notes 3, 4 and 5 to The St. Paul's consolidated financial statements, which are included in the Form 8-K Current Report dated Feb. 26, 1998, provide additional information about The St. Paul's investment portfolio and are incorporated herein by reference. The "Investment Operations" and "Exposures to Market Risk" sections of "Management's Discussion and Analysis" in said Form 8-K Current Report are also incorporated herein by reference.
Asset Management-Investment Banking
The John Nuveen Company (Nuveen) is The St. Paul's asset management- investment banking subsidiary. The St. Paul and Fire and Marine hold a combined 77% interest in Nuveen. Nuveen is headquartered in Chicago and maintains regional sales offices in other cities across the United States. Nuveen specializes in the sponsorship, marketing and management of fixed income and equity investment products, and in municipal and corporate investment banking services.
Through John Nuveen & Co. Incorporated, a wholly-owned subsidiary, Nuveen markets open-end and closed-end (exchange-traded) managed funds. Nuveen also underwrites and trades municipal bonds and tax- free and taxable unit investment trusts (UITs). Nuveen markets its funds and UITs to individuals through registered representatives associated with unaffiliated national and regional broker-dealers and other financial organizations. Through its Municipal Securities Division, Nuveen underwrites and distributes municipal bonds, trades municipal bonds in the secondary market and serves as remarketing agent for variable rate bonds. The majority of its underwritings are for governmental and not-for-profit entities and substantially all of its sales are to institutional investors.
Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp., wholly-owned subsidiaries of John Nuveen & Co. Incorporated, provide investment advice to and administer the business affairs of the Nuveen family of management investment companies.
In 1997, Nuveen acquired Flagship Resources, Inc., a municipal bond mutual fund sponsor and asset management firm, for cash and preferred stock with a total value of $72 million. This acquisition expanded the range of municipal investments offered to investors and added approximately $4.6 billion to Nuveen's assets under management. Also in 1997, Nuveen acquired Rittenhouse Financial Services, Inc., an equity and balanced portfolio investment management firm serving affluent investors, for $147 million in cash. This acquisition added approximately $9 billion to Nuveen's managed assets.
As the leading sponsor of tax-free UITs, Nuveen currently sponsors trusts with assets at Dec. 31, 1997 of approximately $12 billion in national, state and insured portfolios. During 1997, Nuveen offered UITs which invested in equities, treasury bonds and corporate bonds. Nuveen manages 40 tax-free mutual funds and money market funds with net assets of approximately $11 billion in national, state, insured and money market portfolios. Nuveen also manages six taxable mutual funds investing in equity and balanced portfolios. In addition, Nuveen manages 57 tax-free exchange- traded funds with approximately $26 billion in net assets.
In 1997, Nuveen repurchased 1.8 million of its outstanding common shares for a total cost of $55 million. The repurchases were proportioned between The St. Paul and minority shareholders to maintain the combined 77% ownership interest in Nuveen held by The St. Paul and Fire and Marine. The St. Paul received proceeds of $41 million from Nuveen's share repurchases.
COMPETITION AND REGULATION
The insurance underwriting and asset management-investment banking industries are both highly competitive.
Underwriting. The St. Paul's domestic and international underwriting subsidiaries compete with a large number of other insurers and reinsurers. In addition, many large commercial customers self-insure their risks or utilize large deductibles on purchased insurance. The St. Paul's subsidiaries compete principally by attempting to offer a combination of superior products, underwriting expertise and services at a competitive price. The combination of products, services, pricing and other methods of competition varies by line of insurance and by coverage within each line of insurance.
The St. Paul and its underwriting subsidiaries are subject to regulation by certain states as an insurance holding company system. Such regulation generally provides that transactions between companies within the holding company system must be fair and equitable. Transfers of assets among such affiliated companies, certain dividend payments from underwriting subsidiaries and certain material transactions between companies within the system may be subject to prior notice to or approval of state regulatory authorities. During 1997, The St. Paul received from Fire and Marine $200.0 million of cash dividends, and a noncash dividend in the form of common shares of The John Nuveen Company with a market value of $211.1 million. In 1998, up to $427.5 million in cash dividends can be paid by Fire and Marine to The St. Paul without regulatory approval. In addition, any change of control (generally presumed by the holding company laws to occur with the acquisition of 10% or more of an insurance holding company's voting securities) of The St. Paul and its underwriting subsidiaries is subject to such prior approval.
The underwriting subsidiaries are subject to licensing and supervision by government regulatory agencies in the jurisdictions in which they do business. The nature and extent of such regulations vary
but generally have their source in statutes which delegate regulatory, supervisory and administrative powers to state insurance commissioners. Such regulation, supervision and administration of the underwriting subsidiaries may relate, among other things, to the standards of solvency which must be met and maintained; the licensing of insurers and their agents; the nature of and limitations on investments; restrictions on the size of risk which may be insured under a single policy; deposits of securities for the benefit of policyholders; regulation of policy forms and premium rates; periodic examination of the affairs of insurance companies; annual and other reports required to be filed on the financial condition of insurers or for other purposes; requirements regarding reserves for unearned premiums, losses and other matters; the nature of and limitations on dividends to policyholders and shareholders; the nature and extent of required participation in insurance guaranty funds; and the involuntary assumption of hard-to- place or high-risk insurance business, primarily in the personal auto and workers' compensation insurance lines.
Loss ratio trends in property-liability insurance underwriting experience may be improved by, among other things, changing the kinds of coverages provided by policies, providing loss prevention and risk management services, increasing premium rates or by a combination of these. The freedom of The St. Paul's insurance underwriting subsidiaries to meet emerging adverse underwriting trends may be slowed, from time to time, by the effects of those state laws which require prior approval by insurance regulatory authorities of changes in policy forms and premium rates. Fire and Marine does business in all 50 states and the District of Columbia, Puerto Rico and the Virgin Islands. Many of these jurisdictions require prior approval of most or all premium rates.
The St. Paul's insurance underwriting business in the United Kingdom is regulated by the Department of Trade and Industry (DTI). The DTI's principal objectives are to ensure that insurance companies are responsibly managed, that they have adequate funds to meet liabilities to policyholders and that they maintain required levels of solvency. In Canada, the conduct of insurance business is regulated under provisions of the Insurance Companies Act of 1992, which requires insurance companies to maintain certain levels of capital depending on the type and amount of insurance policies in force. The St. Paul is also subject to regulations in the other countries and jurisdictions in which it writes insurance business.
Asset Management-Investment Banking. Nuveen is a publicly-traded company registered under the Securities Exchange Act of 1934 and listed on the New York Stock Exchange. One of its subsidiaries is a broker and dealer registered under the Securities Exchange Act of 1934, and is subject to regulation by the Securities and Exchange Commission, the National Association of Securities Dealers, Inc. and other federal and state agencies. Nuveen's other four subsidiaries are investment advisers registered under the Investment Advisers Act of 1940. As such, they are subject to regulation by the Securities and Exchange Commission.
FORWARD-LOOKING STATEMENT DISCLOSURE
This report contains certain forward-looking statements within the meaning of the Private Litigation Reform Act of 1995. Forward- looking statements are statements other than historical information or statements of current condition. Words such as expects, anticipates, intends, plans, believes, seeks or estimates, or variations of such words, and similar expressions are also intended to identify forward-looking statements. In light of the risks and uncertainties inherent in future projections, many of which are beyond The St. Paul's control, actual results could differ materially from those in the forward-looking statements. These statements should not be regarded as a representation that the objectives will be achieved. Risks and uncertainties include, but are not limited to, the following: general economic conditions including changes in interest rates and the performance of financial markets; changes in domestic and foreign laws, regulation and taxes; changes in the demand for, pricing of, or supply of reinsurance or insurance; catastrophic events of unanticipated frequency or severity; loss of significant customers; judicial decisions and rulings; and various other matters, including the effects of the proposed merger with USF&G Corporation. The St. Paul undertakes no obligation to release publicly the results of any future revisions it may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
St. Paul Fire and Marine Insurance Company owns The St. Paul's corporate headquarters buildings, located at 385 Washington Street and 130 West Sixth Street, Saint Paul, Minnesota. These buildings are adjacent to one another and connected by skyway, and consist of approximately 1.1 million square feet of gross floor space. St. Paul Fire and Marine Insurance Company also owns a building in Freeport, Illinois that houses a portion of its personal insurance operations.
St. Paul International Insurance Company Ltd. owns a building in London, England which houses a portion of its operations. As part of the agreement to sell its brokerage operation, Minet, to Aon in 1997, The St. Paul retained ownership of two former Minet buildings in London and is currently leasing office space in those buildings to Aon.
St. Paul Fire and Marine Insurance Company and its subsidiary, St. Paul Properties, Inc., own a portfolio of income-producing properties in various locations across the United States that they have purchased for investment.
The St. Paul's operating subsidiaries rent or lease office space in most cities in which they operate.
Management considers the currently owned and leased office facilities of The St. Paul and its subsidiaries adequate for the current and anticipated future level of operations.
The information set forth in the "Legal Matters" section of Note 11 to The St. Paul's consolidated financial statements, and the "Environmental and Asbestos Claims" section of "Management's Discussion and Analysis," which are included in the Form 8-K Current Report dated Feb. 26, 1998, are incorporated herein by reference.
In 1990, at the direction of the UK Department of Trade and Industry (DTI), five insurance underwriting subsidiaries of London United Investments PLC (LUI) suspended underwriting new insurance business. At the same time, four of those subsidiaries, being insolvent, suspended payment of claims and have since been placed in provisional liquidation. The fifth subsidiary, Walbrook Insurance Company, continued paying claims until May 1992 but has now also been placed in provisional insolvent liquidation. Weavers Underwriting Agency (Weavers), an LUI subsidiary, managed these insurers. Minet, a former insurance brokerage subsidiary of The St. Paul, had brokered business to and from Weavers for many years. From 1973 through 1980, The St. Paul's UK-based underwriting operations, now called St. Paul International Insurance Company Limited (SPI), had accepted business from Weavers. A portion of that business was ceded by SPI to reinsurers. Certain of those reinsurers have challenged the validity of certain reinsurance contracts relating to the Weavers pool, of which SPI was a member, in an attempt to avoid liability under those contracts. SPI and other members of the Weavers pool are seeking enforcement of the reinsurance contracts. Minet may also become the subject of legal proceedings arising from its role as one of the major brokers for Weavers. When The St. Paul sold Minet in May 1997, it agreed to indemnify the purchaser for most of Minet's preclosing liabilities, including liabilities relating to the Weavers matter. The proceedings will be vigorously contested by The St. Paul and it recognizes that the final outcome of these proceedings, if adverse to The St. Paul, may materially impact the results of operations in the period in which that outcome occurs, but believes it will not have a materially adverse effect on its liquidity or overall financial position.
No matter was submitted to a vote of security holders during the quarter ended Dec. 31, 1997.
All of the following persons are regarded as executive officers of The St. Paul Companies, Inc. because of their responsibilities and duties as elected officers of The St. Paul, Fire and Marine, St. Paul International Underwriting or St. Paul Re. There are no family relationships between any of The St. Paul's executive officers and directors, and there are no arrangements or understandings between any of these officers and any other person pursuant to which the officer was selected as an officer. All of the following officers except Paul J. Liska, Michael J. Conroy and James Hom have held positions with The St. Paul or one or more of its subsidiaries for more than five years, and have been employees of The St. Paul or a subsidiary for more than five years. Paul J. Liska joined The St. Paul in January 1997. For three years prior to that date, Mr. Liska held various management positions with Specialty Foods Corporation, including the position of president and chief executive officer from January 1996 to January 1997. For six years prior to joining Specialty Foods Corporation, Mr. Liska held several executive positions with Kraft General Foods. Michael J. Conroy joined The St. Paul in August 1994. For three years prior to that date, Mr. Conroy served as executive vice president and chief administrative officer of The Home Insurance Company. For two years prior to that, Mr. Conroy held various other management positions with The Home Insurance Company. James Hom joined The St. Paul in October 1994. For two years prior to that date, Mr. Hom served as vice president-corporate claims and project management for The Home Insurance Company. Prior to that, Mr. Hom spent seven years managing insurance consulting groups for two large public accounting firms.
Positions Term of Office
Presently and Period of
Name Age Held Service
---- --- ----------- --------------
Douglas W. 61 Chairman, President Serving at the
Leatherdale and Chief Executive pleasure of the
Officer-The St. Paul Board from 5-90
Companies, Inc.
Patrick A. Thiele 47 Executive Vice Serving at the
President, President pleasure of the
and Chief Executive Board from 5-96
Officer-Worldwide
Insurance Operations
Paul J. Liska 42 Executive Vice Serving at the
President and pleasure of the
Chief Financial Board from 1-97
Officer
Michael J. Conroy 56 Executive Vice Serving at the
President and pleasure of the
Chief Administrative Board from 8-95
Officer-Fire and
Marine
James F. Duffy 54 President - Serving at the
St. Paul Re pleasure of the
Board from 9-93
Mark L. Pabst 51 President - Serving at the
St. Paul pleasure of the
International Board from 2-95
Underwriting
|
Joseph B. Nardi 53 Executive Vice Serving at the
President - Fire and pleasure of the
Marine; President - Board from 2-98
Specialty Commercial
James A. Schulte 48 Executive Vice Serving at the
President - Fire and pleasure of the
Marine; President - Board from 2-98
General Commercial
Stephen J. Klingel 47 President- Serving at the
Personal pleasure of the
Insurance- Board from 8-95
Fire and Marine
Bruce A. Backberg 49 Senior Vice Serving at the
President and pleasure of the
Chief Legal Counsel Board from 11-97
James L. Boudreau 62 Senior Vice Serving at the
President - Finance pleasure of the
Board from 3-98
Howard E. Dalton 60 Senior Vice Serving at the
President and pleasure of the
Chief Accounting Board from 9-87
Officer
Karen L. Himle 42 Senior Vice Serving at the
President- pleasure of the
Public Affairs Board from 11-97
James Hom 42 Senior Vice Serving at the
President- pleasure of the
Corporate Planning Board from 10-94
Greg A. Lee 48 Senior Vice Serving at the
President- pleasure of the
Human Resources Board from 1-93
Sandra Ulsaker 38 Corporate Serving at the
Wiese Secretary pleasure of the
Board from 2-98
|
In addition to these current employees, The St. Paul has announced that the executives of USF&G named below have agreed, if the merger is consummated, to become part of The St. Paul's senior management structure. There are no family relationships between these executives and the current executives and directors of The St. Paul, and there are no arrangements and understandings between these executives and any other person pursuant to which the executive was chosen to be an officer of The St. Paul upon consummation of the merger.
The St. Paul's common stock is traded nationally on the New York Stock Exchange, where it is assigned the symbol SPC. The stock is also listed on the London Stock Exchange under the symbol SPA. The number of holders of record, including individual owners, of The St. Paul's common stock was 7,677 as of March 25, 1998.
The following table sets forth the amount of cash dividends declared per share and the high and low closing sales prices of The St. Paul's common stock for each quarter during 1997 and 1996:
Cash
Dividend
High Low Declared
1997 ---- ---- ---------
----
1st Quarter $71 5/8 $57 7/8 $0.47
2nd Quarter 80 1/8 64 1/8 0.47
3rd Quarter 81 13/16 73 1/8 0.47
4th Quarter 85 5/16 79 1/8 0.47
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Cash dividend paid in 1997 was $1.85.
Cash
Dividend
High Low Declared
1996 ---- ---- ---------
----
1st Quarter $60 $54 $0.44
2nd Quarter 56 1/8 50 7/8 0.44
3rd Quarter 55 1/2 50 5/8 0.44
4th Quarter 59 5/8 54 0.44
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Cash dividend paid in 1996 was $1.72.
As partial consideration for the acquisition of the economic
interest of Gravett & Tilling (Holdings) Limited, a United Kingdom
corporation, The St. Paul, on Dec. 31, 1997, issued 20,488 shares
of its common stock to the eleven former shareholders of Gravett &
Tilling (Holdings) Limited in an exempt transaction pursuant to
Section 4(2) of the Securities Act of 1933, as amended. As part of
this acquisition, The St. Paul also issued to the eleven former
shareholders of Gravett & Tilling (Holdings) Limited 28,748 shares
on Dec. 31, 1996. The market value of each share issuance was
approximately one million pounds sterling.
The "Eleven-year Summary of Selected Financial Data" included in the Form 8-K Current Report dated February 26, 1998 is incorporated herein by reference.
The "Management's Discussion and Analysis" included in the Form 8-K Current Report dated February 26, 1998 is incorporated herein by reference.
The "Exposures to Market Risk" section in the Form 8-K Current Report dated February 26, 1998 is incorporated herein by reference.
The "Management's Responsibility for Financial Statements," "Independent Auditors' Report," Consolidated Balance Sheets, Consolidated Statements of Income, Shareholders' Equity, Comprehensive Income and Cash Flows, and Notes to Consolidated Financial Statements included in the Form 8-K Current Report dated Feb. 26, 1998 are incorporated herein by reference.
The "Election of Directors - Nominees for Directors" section, which provides information regarding The St. Paul's directors, on pages 4 to 6 of The St. Paul's Proxy Statement relating to the annual meeting of shareholders to be held May 5, 1998, is incorporated herein by reference. In addition, Ronald James, 47, is currently a director of The St. Paul, but is not standing for re-election at the annual meeting of shareholders to be held May 5, 1998. Information regarding The St. Paul's executive officers is included in Part I of this report.
If the proposed merger agreement with USF&G is consummated, Mr. Norman P. Blake, Jr. (currently Chairman of the Board, President and Chief Executive Officer of USF&G) and two additional USF&G directors selected by the board governance committee of The St. Paul's Board of Directors will be appointed to The St. Paul's Board.
The "Executive Compensation" section on pages 25 to 36 and the "Election of Directors - Board of Directors Compensation" section on pages 7 to 9 of the Proxy Statement relating to the annual meeting of shareholders to be held May 5, 1998, are incorporated herein by reference.
The "Security Ownership of Certain Beneficial Owners and Management" section on pages 39 to 41 of the Proxy Statement relating to the annual meeting of shareholders to be held May 5, 1998, is incorporated herein by reference.
The "Indebtedness of Management" section on page 38 of the Proxy Statement relating to the annual meeting of shareholders to be held May 5, 1998, is incorporated herein by reference.
(a) Filed documents. The following documents are filed as part of this report:
1. Financial Statements.
Incorporated by reference into Part II of this report:
The St. Paul Companies, Inc. and Subsidiaries:
Consolidated Statements of Income - Years Ended
December 31, 1997, 1996 and 1995
Consolidated Balance Sheets - December 31, 1997
and 1996
Consolidated Statements of Shareholders'
Equity - Years Ended December 31, 1997, 1996 and 1995
Consolidated Statements of Comprehensive Income -
Years Ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows - Years Ended
December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
The foregoing documents are incorporated by reference to the Form 8-K Current Report dated Feb. 26, 1998.
2. Financial Statement Schedules.
The St. Paul Companies, Inc. and Subsidiaries:
Independent Auditors' Report on Financial
Statement Schedules
I. Summary of Investments - Other than Investments
in Related Parties
II. Condensed Financial Information of Registrant
III. Supplementary Insurance Information
IV. Reinsurance
V. Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable, not required, or the information is included elsewhere in the Consolidated Financial Statements or Notes thereto.
3. Exhibits. An Exhibit Index is set forth at page 36 of this report.
(2) The definitive Agreement and Plan of Merger among The St. Paul, USF&G Corporation and SP Merger Corporation is incorporated herein by reference to the Form 8-K Current Report dated January 19, 1998.
(3) The current articles of incorporation of The St. Paul are incorporated herein by reference to Form 10-Q for the quarter ended June 30, 1995.
The current bylaws of The St. Paul are incorporated herein by reference to Form 10-Q for the quarter ended March 31, 1994.
(4) (a) A specimen certificate of The St. Paul's common stock is incorporated herein by reference to the Form 10-K for the year ended December 31, 1992.
(b) The Amended and Restated Shareholder Protection Rights Agreement is incorporated herein by reference to Form 10-Q for the quarter ended June 30, 1995.
There are no long-term debt instruments in which the total amount of securities authorized exceeds 10% of the total assets of The St. Paul and its subsidiaries on a consolidated basis. The St. Paul agrees to furnish a copy of any of its long- term debt instruments to the Securities and Exchange Commission upon request.
(10) (a) The Deferred Management Incentive Awards Plan is filed herewith.
(b) The Directors' Deferred Compensation Plan is filed herewith.
(c) The Relocation Loan Payback Agreement with Mr. James F. Duffy is filed herewith.
(d) The 1994 Stock Incentive Plan, as amended, is filed herewith.
(e) The Benefit Equalization Plan - 1995 Revision is filed herewith.
(f) First Amendment to Benefit Equalization Plan - 1995 Revision is filed herewith.
(g) Executive Post-Retirement Life Insurance Plan - Summary Plan Description is filed herewith.
(h) Executive Long-Term Disability Plan - Summary Plan Description is filed herewith.
(i) Letter Agreement dated Jan. 18, 1998 among The St. Paul, USF&G Corporation, SP Merger Corporation and Mr. Norman P. Blake, Jr. pertaining to Mr. Blake's duties with The St. Paul subsequent to the consummation of the proposed merger of The St. Paul and USF&G Corporation is filed herewith.
(j) The St. Paul Re Long-Term Incentive Plan is incorporated by reference to the Form S-8 Registration Statement filed March 17, 1998 (Commission File No. 333-48121).
(k) Letter Agreement between The St. Paul and Mr. Paul J. Liska relating to the terms of his employment is incorporated by reference to Form 10-Q for the quarter ended March 31, 1997.
(l) Letter Agreement between The St. Paul and Mr. Paul J. Liska relating to severance benefits is incorporated by reference to Form 10-Q for the quarter ended March 31, 1997.
(m) The Special Leveraged Stock Purchase Plan is incorporated by reference to Form 10-Q for the quarter ended March 31, 1997.
(n) Amendment to Deferred Stock Agreement with Mr. Mark L. Pabst is incorporated by reference to Form 10-Q for the quarter ended March 31, 1997.
(o) The Deferred Stock Grant Agreement with Mr. Mark L. Pabst is incorporated by reference to the Form 10-K for the year ended December 31, 1995.
(p) The Directors' Charitable Award Program is incorporated by reference to the Form 10-K for the year ended December 31, 1994.
(q) The 1994 Annual Incentive Plan is incorporated by reference to Form 10-Q for the quarter ended March 31, 1994.
(r) The Long-Term Incentive Plan is incorporated by reference to Form 10-Q for the quarter ended March 31, 1994.
(s) The Non-Employee Director Stock Retainer Plan is incorporated by reference to Form 10-K for the year ended December 31, 1991.
(t) The summary description of the Outside Directors' Retirement Plan is incorporated by reference to the Proxy Statement relating to the annual meeting of shareholders to be held May 5, 1998.
(u) The 1988 Stock Option Plan as in effect for options granted prior to June 1994, as amended, is incorporated by reference to Form 10-K for the year ended December 31, 1990.
(v) The Restricted Stock Award Plan, as in effect for awards granted prior to June 1994, as amended, is incorporated by reference to Form 10-K for the year ended December 31, 1989.
(w) Special Severance Policy is incorporated by reference to Form 10-K for the year ended December 31, 1987.
(x) Stock option agreement between The St. Paul Companies, Inc. and USF&G Corporation dated as of January 19, 1998 is incorporated by reference to the Form 8-K Current Report dated January 19, 1998.
(11) A statement regarding the computation of per share earnings is filed herewith.
(12) A statement regarding the computation of the ratio of earnings to fixed charges and the ratio of earnings to combined fixed charges and preferred stock dividends is filed herewith.
(13) The St. Paul's 1997 Annual Report to Shareholders is furnished to the Commission in paper format pursuant to Rule 14a-3(c). The following portions of such annual report were filed electronically with the Commission in the Form 8-K Current Report dated Feb. 26, 1998 and are incorporated herein by reference to such Form 8-K:
Portions of Annual Report Items in
for the year ended this
December 31, 1997 report
------------------------- --------
Consolidated Financial
Statements Item 8
Notes to Consolidated
Financial Statements Item 1,8
Independent Auditors' Report Item 8
Management's Discussion and
Analysis Item 1, 3, 7
Eleven-year Summary of
Selected Financial Data Item 6
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(21) List of subsidiaries of The St. Paul Companies, Inc. is filed herewith.
(23) Consent of independent auditors to incorporation by reference of certain reports into Registration Statements on Form S-8 (SEC File No. 2-69894, No. 33-15392, No. 33-20516, No. 33-23446, No. 33-23948, No. 33-24220, No. 33-24575, No. 33- 26923, No. 33-49273, No. 33-56987, No. 333-01065, No. 333-22329, No. 333-25203, No. 333-28915 and No. 333-48121), Form S-3 (SEC File No. 33-33931, No. 33- 50115, No. 33-58491 and No. 333-06465) and Form S-4 (SEC File No. 333-47007) is filed herewith.
(24) Power of attorney is filed herewith.
(27) Financial data schedule is filed herewith.
(b) Reports on Form 8-K.
A Form 8-K Current Report dated October 27, 1997 was filed relating to the announcement of The St. Paul's financial results for the quarter ended September 30, 1997.
A Form 8-K Current Report dated January 19, 1998, was filed relating to the announcement of The St. Paul's definitive merger agreement and stock option agreement with USF&G Corporation.
A Form 8-K Current Report dated January 26, 1998, was filed relating to the announcement of The St. Paul's financial results for the year ended December 31, 1997.
A Form 8-K Current Report dated February 26, 1998, was filed containing the following documents for The St. Paul for the year ended Dec. 31, 1997: Audited Financial Statements, Notes to Consolidated Financial Statements, Management's Discussion and Analysis of Financial Condition and Results of Operations, Eleven-year Summary of Selected Financial Data, Independent Auditors' Report, Statement Regarding Management's Responsibility for Financial Statements, Consent of Independent Auditors and Financial Data Schedule.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, The St. Paul Companies, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 26, 1998 By /s/ Bruce A. Backberg
-------------- ---------------------
Bruce A. Backberg
Senior Vice President and
Chief Legal Counsel
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of The St. Paul Companies, Inc. and in the capacities and on the dates indicated.
Date: March 26, 1998 By /s/ Douglas W. Leatherdale
-------------- --------------------------
Douglas W. Leatherdale,
Director, Chairman of the
Board, President and Chief
Executive Officer
Date: March 26, 1998 By /s/ Patrick A. Thiele
-------------- ---------------------
Patrick A. Thiele, Director,
Executive Vice President,
President and Chief
Executive Officer -
Worldwide Insurance
Operations
Date: March 26, 1998 By /s/ Paul J. Liska
-------------- -----------------
Paul J. Liska, Executive
Vice President and Chief
Financial Officer
Date: March 26, 1998 By /s/ Howard E. Dalton
-------------- --------------------
Howard E. Dalton, Senior
Vice President and Chief
Accounting Officer
Date: March 26, 1998 By /s/ Michael R. Bonsignore
-------------- -------------------------
Michael R. Bonsignore*, Director
Date: March 26, 1998 By /s/ John H. Dasburg
-------------- -------------------
John H. Dasburg*, Director
Date: March 26, 1998 By /s/ W. John Driscoll
-------------- --------------------
W. John Driscoll*, Director
Date: March 26, 1998 By /s/ Pierson M. Grieve
-------------- ---------------------
Pierson M. Grieve*, Director
Date: March 26, 1998 By /s/ Thomas R. Hodgson
-------------- ---------------------
Thomas R. Hodgson*, Director
Date: March 26, 1998 By /s/ Ronald James
-------------- ----------------
Ronald James*, Director
Date: March 26, 1998 By /s/ David G. John
-------------- -----------------
David G. John*, Director
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Date: March 26, 1998 By /s/ William H. Kling
-------------- --------------------
William H. Kling*, Director
Date: March 26, 1998 By /s/ Bruce K. MacLaury
-------------- ---------------------
Bruce K. MacLaury*, Director
Date: March 26, 1998 By /s/ Glen D. Nelson
-------------- ------------------
Glen D. Nelson*, Director
Date: March 26, 1998 By /s/ Anita M. Pampusch
-------------- ---------------------
Anita M. Pampusch*, Director
Date: March 26, 1998 By /s/ Gordon M. Sprenger
-------------- ----------------------
Gordon M. Sprenger*, Director
Date: March 26, 1998 *By /s/ Bruce A. Backberg
-------------- ---------------------
Bruce A. Backberg, Attorney-
in-fact
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INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES
The Board of Directors and Shareholders
The St. Paul Companies, Inc.:
Under date of January 26, 1998, we reported on the consolidated balance sheets of The St. Paul Companies, Inc. and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of income, shareholders' equity, comprehensive income and cash flows for each of the years in the three-year period ended December 31, 1997, as contained in the 1997 annual report to shareholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1997. In connection with our audits of the aforementioned consolidated financial statements, we also have audited the related financial statement schedules listed in the index in Item 14(a) 2. of said Form 10-K. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
Minneapolis, Minnesota /s/ KPMG Peat Marwick LLP
January 26, 1998 ---------------------
KPMG Peat Marwick LLP
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THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
SCHEDULE I - SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
December 31, 1997
(In thousands)
1997
------------------------------------
Amount at
which shown
in the
Cost* Value* balance sheet
-------- --------- -------------
Type of investment:
Fixed maturities:
----------------
United States Government and
government agencies and
authorities $ 2,257,397 $ 2,364,982 $ 2,364,982
States, municipalities and
political subdivisions 5,071,738 5,438,306 5,438,306
Foreign governments 946,317 979,274 979,274
Corporate securities 1,840,337 1,925,971 1,925,971
Mortgage-backed securities 1,690,048 1,741,260 1,741,260
---------- ---------- ----------
Total fixed maturities 11,805,837 12,449,793 12,449,793
---------- ---------- ----------
Equity securities:
-----------------
Common stocks:
Public utilities 27,521 40,446 40,446
Banks, trusts and insurance
companies 154,287 203,850 203,850
Industrial, miscellaneous and
all other 602,461 789,624 789,624
---------- ---------- ----------
Total equity securities 784,269 1,033,920 1,033,920
---------- ---------- ----------
Venture capital 324,333 $ 461,892 461,892
---------- ========== ----------
Real estate 654,114** 649,114
Other investments 41,359 41,359
Short-term investments 400,004 400,004
---------- ----------
Total investments $14,009,916 $15,036,082
========== ==========
|
* See Notes 1, 3, 4 and 5 to the consolidated financial statements included in The St. Paul's 1997 Annual Report to Shareholders.
** The cost of real estate represents the cost of the properties before valuation provisions. (See Schedule V on page 35).
THE ST. PAUL COMPANIES, INC. (Parent Only)
SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEET INFORMATION
December 31, 1997 and 1996
(In thousands)
Assets: 1997 1996
------- -------
Investment in subsidiaries $5,096,653 $4,533,106
Investments:
Fixed maturities 159,957 162,895
Equity securities 52,834 40,424
Short-term investments 11,472 25,271
Deferred income taxes 455,445 453,560
Other assets 257,925 102,280
--------- ---------
Total assets $6,034,286 $5,317,536
========= =========
Liabilities:
Debt $1,091,995 $1,090,477
Dividends payable to shareholders 39,305 36,579
Other liabilities 276,276 186,660
--------- ---------
Total liabilities 1,407,576 1,313,716
--------- ---------
Shareholders' Equity:
Preferred:
Convertible preferred stock 137,892 142,131
Guaranteed obligation - PSOP (121,167) (126,068)
--------- ---------
Total preferred shareholders' equity 16,725 16,063
--------- ---------
Common:
Common stock, authorized 240,000 shares;
issued 83,728 shares (83,198 in 1996) 512,162 475,710
Retained earnings 3,450,601 2,935,928
Guaranteed obligation - ESOP (8,453) (20,353)
Accumulated other comprehensive income:
Unrealized appreciation of investments 677,069 616,968
Unrealized loss on foreign
currency translation (21,394) (20,496)
--------- ---------
Total accumulated other
comprehensive income 655,675 596,472
--------- ---------
Total common shareholders' equity 4,609,985 3,987,757
--------- ---------
Total shareholders' equity 4,626,710 4,003,820
--------- ---------
Total liabilities and
shareholders' equity $6,034,286 $5,317,536
========= =========
|
See accompanying notes to condensed financial information.
THE ST. PAUL COMPANIES, INC. (Parent Only)
SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENT OF INCOME INFORMATION
Years Ended December 31, 1997, 1996 and 1995
(In thousands)
1997 1996 1995
------ ------ ------
Revenues:
Net investment income $ 17,472 $ 12,695 $ 9,165
Realized investment gains 7,211 8,810 8,800
------- ------- -------
Total revenues 24,683 21,505 17,965
------- ------- -------
Expenses:
Interest expense 66,726 64,731 54,672
Administrative and other 52,160 39,906 38,548
------- ------- -------
Total expenses 118,886 104,637 93,220
------- ------- -------
Loss before
income tax benefit (94,203) (83,132) (75,255)
Income tax benefit (113,366) (46,462) (18,941)
------- ------- -------
Net income (loss) from continuing
operations- parent only 19,163 (36,670) (56,314)
Provision for loss on disposal of
discontinued operations (67,750) (88,543) -
------- ------- -------
Net loss - parent only (48,587) (125,213) (56,314)
Equity in net income
of subsidiaries 754,060 575,312 577,523
------- ------- -------
Consolidated net income $705,473 $450,099 $521,209
======= ======= =======
|
See accompanying notes to condensed financial information.
THE ST. PAUL COMPANIES, INC. (Parent Only)
SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENT OF CASH FLOWS INFORMATION
Years Ended December 31, 1997, 1996 and 1995
(In thousands)
1997 1996 1995
------ ------ ------
Operating Activities:
Net loss $ (48,587) $(125,213) $ (56,314)
Cash dividends from subsidiaries 216,301 200,648 206,118
Tax payments from subsidiaries 166,423 93,928 159,216
State and federal income tax payments (61,000) (70,000) (103,000)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Provision for loss on
discontinued operations 67,750 88,543 -
Deferred tax benefit - operations (59,779) (21,891) (1,077)
Realized investment gains (7,211) (8,810) (8,800)
Other (19,458) (3,951) (110)
------- ------- -------
Cash provided by operating activities 254,439 153,254 196,033
------- ------- -------
Cash outflow resulting from sale
of discontinued operations (54,018) - -
Investing Activities:
Purchases of investments (55,756) (104,322) (218,525)
Proceeds from sales and maturities
of investments 75,674 109,958 93,919
Capital contributions and loans
to subsidiaries (107,120) (55,922) (223,623)
Other (3,221) (268) (870)
------- ------- -------
Cash used in
investing activities (90,423) (50,554) (349,099)
------- ------- -------
Financing Activities:
Dividends paid to shareholders (165,809) (155,268) (144,662)
Proceeds from issuance of debt 117,572 53,000 455,028
Repayment of debt (100,000) (17,711) (125,446)
Repurchase of common shares (26,503) (74,217) (41,714)
Proceeds from Nuveen stock repurchase 41,069 73,966 -
Stock options exercised and other 23,673 17,530 9,860
------- ------- -------
Cash provided by
(used in) financing activities (109,998) (102,700) 153,066
------- ------- -------
Change in cash - - -
Cash at beginning of year - - -
------- ------- -------
Cash at end of year $ - $ - $ -
======= ======= =======
|
See accompanying notes to condensed financial information.
THE ST. PAUL COMPANIES, INC. (Parent Only)
SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL INFORMATION
1. The accompanying condensed financial information should be read in conjunction with the consolidated financial statements and notes included in The St. Paul's 1997 Annual Report to Shareholders. The Annual Report includes The St. Paul's Consolidated Statements of Shareholders' Equity and Comprehensive Income.
Some data in the accompanying condensed financial information for the years 1996 and 1995 were reclassified to conform with the 1997 presentation.
2. Debt consists of the following (in thousands):
December 31,
------------------
1997 1996
----- -----
Medium-term notes $ 511,920 $ 430,427
Convertible subordinated debentures (1) 262,026 262,026
Commercial paper 168,429 131,610
Guaranteed PSOP debt (1) 121,167 126,068
Intercompany loan (1) 20,000 20,000
Guaranteed ESOP debt (1) 5,673 6,462
Guaranteed ESOP debt 2,780 13,890
9-3/8% notes - 99,994
--------- ---------
Total debt $1,091,995 $1,090,477
========= =========
|
(1) Eliminated in consolidation.
See Note 8 to the consolidated financial statements included in the 1997 Annual Report to Shareholders for further information on debt outstanding at Dec. 31, 1997.
The amount of debt, other than debt eliminated in consolidation, that becomes due during each of the next five years is as follows: 1998, $27.8 million; 1999, $20.0 million; 2000, none; 2001, $45.5 million; and 2002, $217.1 million.
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION
(In thousands)
At December 31,
----------------------------------------------
Gross loss
Deferred and loss Other policy
policy adjustment Gross claims and
acquisition expense unearned benefits
expenses reserves premiums payable
---------- -------------- -------- ----------
1997
----
Property-Liability
Insurance Underwriting:
Worldwide Insurance
Operations:
Fire and Marine:
Specialized Commercial $127,208 $ 3,441,821 $ 700,917 -
Commercial 72,415 2,397,658 359,713 -
Personal Insurance 60,594 516,924 324,712 -
Medical Services 56,381 2,009,335 563,925 -
------- ---------- ---------- -------
Total Fire and Marine 316,598 8,365,738 1,949,267 -
International 20,715 1,227,370 154,181 -
------- ---------- ---------- -------
Total Worldwide Insurance 337,313 9,593,108 2,103,448 -
St. Paul Re 66,961 2,224,525 276,255 -
------- ---------- ---------- -------
Total $404,274 $11,817,633 $2,379,703 -
======= ========== ========= =======
1996
----
Property-Liability
Insurance Underwriting:
Worldwide Insurance
Operations:
Fire and Marine:
Specialized Commercial $120,222 $ 3,345,102 $ 719,969 -
Commercial 78,702 2,629,381 483,135 -
Personal Insurance 59,803 483,414 303,658 -
Medical Services 60,087 2,053,221 650,199 -
------- ---------- --------- -------
Total Fire and Marine 318,814 8,511,118 2,156,961 -
International 17,700 1,122,397 138,029 -
------- ---------- --------- -------
Total Worldwide Insurance 336,514 9,633,515 2,294,990 -
St. Paul Re 65,254 2,039,633 271,561 -
------- ---------- --------- -------
Total $401,768 $11,673,148 $2,566,551 -
======= ========== ========= =======
|
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION
(In thousands)
Insurance
losses Amortization
Net and loss of policy Other
|
Worldwide
Insurance
Operations:
Fire and Marine:
Specialized
Commercial $1,291,702 - $ 861,148 $ 289,193 $116,017 $1,281,745
Commercial 964,121 - 683,618 247,866 101,792 872,999
Personal
Insurance 747,449 - 587,344 155,897 67,462 767,523
Medical
Services 594,186 - 455,623 98,371 51,357 522,960
--------- ------- --------- ------- ------- ---------
Total Fire
and Marine 3,597,458 - 2,587,733 791,327 336,628 3,445,227
International 274,968 - 229,629 49,989 46,357 289,883
--------- ------ --------- ------- ------- ---------
Total
Worldwide
Insurance 3,872,426 - 2,817,362 841,316 382,985 3,735,110
St. Paul Re 744,030 - 527,806 180,307 68,380 744,793
Net investment
income - $880,802 - - - -
Other - - - - 102,159 -
--------- ------- --------- ------- ------- ---------
Total $4,616,456 $880,802 $3,345,168 $1,021,623 $553,524 $4,479,903
========= ======= ========= ========= ======= =========
|
Specialized
Commercial $1,272,561 - $ 826,670 $303,206 $ 97,935 $1,278,814
Commercial 862,092 - 637,693 204,904 83,957 778,487
Personal
Insurance 707,299 - 694,551 156,109 58,456 724,616
Medical
Services 601,679 - 409,124 100,086 38,680 585,876
--------- ------- --------- ------- ------- ---------
Total Fire
and Marine 3,443,631 - 2,568,038 764,305 279,028 3,367,793
International 268,830 - 196,948 47,308 46,360 267,805
--------- ------- --------- ------- ------- ---------
Total
Worldwide
Insurance 3,712,461 - 2,764,986 811,613 325,388 3,635,598
St. Paul Re 735,787 - 553,315 163,843 55,327 760,524
Net investment
income - $794,901 - - - -
Other - - - - 131,761 -
--------- ------- --------- ------- ------- ---------
Total $4,448,248 $794,901 $3,318,301 $975,456 $512,476 $4,396,122
========= ======= ========= ======= ======= =========
|
Specialized
Commercial $1,230,790 - $ 961,801 $298,765 $ 98,328 $1,304,062
Commercial 587,016 - 378,754 155,125 57,580 617,767
Personal
Insurance 655,347 - 486,275 145,547 56,524 673,347
Medical
Services 605,468 - 387,716 97,695 44,557 673,980
--------- ------- --------- ------- ------- ---------
Total Fire
and Marine 3,078,621 - 2,214,546 697,132 256,989 3,269,156
International 237,727 - 188,728 27,326 44,857 260,582
--------- ------- --------- ------- ------- ---------
Total
Worldwide
Insurance 3,316,348 - 2,403,274 724,458 301,846 3,529,738
St. Paul Re 654,981 - 461,033 132,521 56,936 713,475
Net investment
income - $731,096 - - - -
Other - - - - 82,130 -
--------- ------- --------- ------- ------- ---------
Total $3,971,329 $731,096 $2,864,307 $856,979 $440,912 $4,243,213
========= ======= ========= ======= ======= =========
|
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
SCHEDULE IV - REINSURANCE
Years Ended December 31, 1997, 1996 and 1995
(In thousands)
Percentage
Property-liability Ceded to Assumed of amount
insurance Gross other from other Net assumed to
premiums earned: amount companies companies amount net
--------------- ------- --------- --------- -------- ----------
1997 $4,142,706 484,358 958,108 4,616,456 20.8%
========= ======= ======= =========
1996 $4,001,384 528,409 975,273 4,448,248 21.9%
========= ======= ======= =========
1995 $3,678,190 641,351 934,490 3,971,329 23.5%
========= ======= ======= =========
|
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
SCHEDULE V - VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1997, 1996 and 1995
(In thousands)
Additions
---------------------
Balance at Charged to Charged to Balance
beginning costs and other at end
Description of year expenses accounts Deductions(1) of year
----------- --------- ---------- --------- ---------- -------
1997
----
Real estate valuation
adjustment $14,000 - - 9,000 5,000
====== ====== ===== ====== ======
Allowance for
uncollectible:
Agency loans $ 1,664 - - - 1,664
====== ====== ===== ====== ======
Premiums receivable
from underwriting
activities $21,159 10,227 - 7,091 24,295
====== ====== ===== ====== ======
Reinsurance $22,681 5,784 - 1,712 26,753
====== ====== ===== ====== ======
Uncollectible
deductibles $15,694 3,257 - - 18,951
====== ====== ===== ====== ======
1996
----
Real estate valuation
adjustment $34,000 - - 20,000 14,000
====== ====== ===== ====== ======
Allowance for
uncollectible:
Agency loans $ 1,664 - - - 1,664
====== ====== ===== ====== ======
Premiums receivable
from underwriting
activities $18,918 5,073 - 2,832 21,159
====== ====== ===== ====== ======
Reinsurance $21,531 1,150 - - 22,681
====== ====== ===== ====== ======
Uncollectible
deductibles $16,000 - - 306 15,694
====== ====== ===== ====== ======
1995
----
Real estate valuation
adjustment $24,000 10,000 - - 34,000
====== ====== ===== ====== ======
Allowance for
uncollectible:
Agency loans $ 1,664 - - - 1,664
====== ====== ===== ====== ======
Premiums receivable
from underwriting
activities $20,938 4,192 - 6,212 18,918
====== ====== ===== ====== ======
Reinsurance $25,823 - - 4,292 21,531
====== ====== ===== ====== ======
Uncollectible
deductibles $16,000 - - - 16,000
====== ====== ===== ====== ======
|
(1) Deductions include write-offs of amounts determined to be uncollectible, unrealized foreign exchange gains and losses and, for real estate, a reduction in the valuation allowance for properties sold during the year.
EXHIBIT INDEX*
------------- How
Exhibit Filed
-------- -----
|
(2) Plan of acquisition, reorganization, arrangement,
liquidation, or succession
(a) Definitive Agreement and Plan of Merger among
The St. Paul, USF&G Corporation and SP Merger
Corporation***.............................................
(3) Articles of incorporation and by-laws***.........................
(4) Instruments defining the rights of security holders,
including indentures
(a) Specimen Common Stock Certificate***.........................
(b) Amended and Restated Shareholder Protection Rights
Agreement***................................................
(9) Voting trust agreements**........................................
(10) Material contracts
(a) The Deferred Management Incentive Awards Plan................(1)
(b) The Directors' Deferred Compensation Plan....................(1)
(c) Relocation Loan Payback Agreement with Mr. James F. Duffy....(1)
(d) 1994 Stock Incentive Plan, as Amended........................(1)
(e) Benefit Equalization Plan - 1995 Revision....................(1)
(f) First Amendment to Benefit Equalization
Plan - 1995 Revision........................................(1)
(g) Executive Post-Retirement Life Insurance Plan -
Summary Plan Description....................................(1)
(h) Executive Long-Term Disability Plan -
Summary Plan Description....................................(1)
(i) Letter Agreement dated Jan. 18, 1998 among The St. Paul,
USF&G Corporation, SP Merger Corporation and Mr.
Norman P. Blake, Jr. pertaining to Mr. Blake's duties with
The St. Paul subsequent to the consummation of the proposed
merger of The St. Paul and USF&G Corporation................(1)
(j) The St. Paul Re Long-Term Incentive Plan***..................
(k) Letter Agreement dated May 8, 1997 between The St. Paul
and Mr. Paul J. Liska related to the terms of
his employment***...........................................
(l) Letter Agreement, agreed to January 20, 1997 between
The St. Paul and Mr. Paul J. Liska related to severance
benefits***.................................................
(m) The Special Leveraged Stock Purchase Plan***.................
(n) Amendment to Deferred Stock Agreement with Mr. Mark L.
Pabst***....................................................
(o) The Deferred Stock Grant Agreement with Mr. Mark L.
Pabst***....................................................
(p) The Directors' Charitable Award Program***...................
(q) 1994 Annual Incentive Plan***................................
(r) Long-Term Incentive Plan***..................................
(s) Non-Employee Director Stock Retainer Plan***.................
(t) Outside Directors' Retirement Plan***........................
(u) 1988 Stock Option Plan***....................................
(v) Restricted Stock Award Plan***...............................
(w) Special Severance Policy***..................................
(x) Stock Option Agreement between The St. Paul
Companies, Inc. and USF&G Corporation dated
as of January 19, 1998***...................................
(11) Statements re computation of per share earnings................(1)
(12) Statements re computation of ratios............................(1)
(13) Annual report to security holders**............................
(16) Letter re change in certifying accountant**....................
(18) Letter re change in accounting principles**....................
(21) Subsidiaries of The St. Paul...................................(1)
(22) Published report regarding matters submitted to vote
of security holders**.........................................
(23) Consent of experts and counsel.................................(1)
(24) Power of attorney..............................................(1)
(27) Financial data schedule........................................(1)
(99) Additional exhibits**
|
* The exhibits are included only with the copies of this report that are filed with the Securities and Exchange Commission. However, copies of the exhibits may be obtained from The St. Paul for a reasonable fee by writing to the Corporate Secretary, The St. Paul Companies, Inc., 385 Washington Street, St. Paul, Minnesota 55102.
** These items are not applicable.
*** These items are incorporated by reference as described in Item 14(a)(3) of this report.
(1) Filed electronically herewith.
Exhibit 10(a)
THE ST. PAUL COMPANIES, INC
DEFERRED MANAGEMENT INCENTIVE AWARDS PLAN
(As Amended and Restated Effective as of January 1, 1998)
Section 1
Introduction
1.1 The Plan and Its Effective Date. The St. Paul Companies, Inc. Deferred Management Incentive Awards Plan ("Plan") was established as of January 1, 1984. The effective date of the amendment and restatement of the Plan as set forth herein is January 1, 1998.
1.2 Purpose. The St. Paul Companies, Inc. (the "Company") has established the Plan for a select group of management and highly compensated employees of the Company or any subsidiary or affiliate that adopts the Plan in accordance with Section 6 to retain and attract highly qualified personnel by offering the benefits of a non-qualified, unfunded plan of deferred compensation. The Plan is intended to be a top-hat plan described in Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974 ("ERISA").
1.3 Administration. The Plan shall be administered by the Plan Administrator who shall be appointed by the Personnel and Compensation Committee (the "Committee") of the board of directors of the Company (the "Board of Directors"). In the absence of the appointment of a Plan Administrator, the officer of the Company having direct responsibility for compensation and benefits shall be the Plan Administrator. The Plan Administrator shall have the authority to delegate, from time to time, his responsibilities under the Plan to such person or persons as he deems advisable and may revoke any such delegation of responsibility. Any action by the delegate in the exercise of delegated responsibilities shall have the same force and effect as if such action was taken by the Plan Administrator.
Section 2
Participation and Deferral Elections
2.1 Eligibility and Participation. Subject to the
conditions and limitations of the Plan, eligibility for
participation in the Plan shall be limited to employees of the
Company or an Employer (as defined in Section 6.1) (i) who
participate in the Company's Annual Incentive Plan (the
"Employees' Incentive Plan") or the Company's Annual Incentive
Plan for executive officers (the "Executive Officers' Incentive
Plan"), and (ii) who are designated or who are members of a class
of employees designated as eligible to participate in the Plan
from time to time by the Company's Sr. Vice President, Human
Resources. An employee who satisfies each of the foregoing
eligibility criteria is referred to as an "Eligible Employee."
Any Eligible Employee who makes a Deferral Election as described
in Section 2.2 below shall become a participant in the Plan
("Participant") and shall remain a Participant until the entire
balance of all his Deferred Compensation Accounts (defined in
Section 3.1 below) is distributed to him.
2.2 Rules for Deferral Elections. Any Eligible Employee may make an irrevocable election ("Deferral Election") to defer receipt of all or any percentage of his annual incentive compensation award ("Incentive Award") under the Employees' Incentive Plan or the Executive Officers' Incentive Plan for a calendar year in accordance with the rules set forth below:
(a) An individual shall be eligible to make a Deferral Election only if he is an Eligible Employee on the date such election is made.
(b) The minimum amount that may be deferred for any year is $1,000. If the amount or percentage specified for deferral in an Eligible Employee's Deferral Election would result in the deferral of less than $1,000, the amount or percentage specified will not be deferred hereunder but will be paid to the Eligible Employee at the time that Incentive Awards are otherwise payable.
(c) All Deferral Elections must be made in writing on such form as the Plan Administrator may prescribe and must be received by the Plan Administrator no later than November 30 of the calendar year immediately preceding the calendar year in which such Incentive Award is otherwise payable. Notwithstanding the foregoing, Deferral Elections with respect to Incentive Awards otherwise payable in 1998 may be filed on or before December 15, 1997.
(d) Amounts will be deferred to the last day of the month specified by the Eligible Employee at the time of his Deferral Election (the "Distribution Date") and payment will be made or will commence within 30 days after the Distribution Date. Except as provided in subsection (j), the Distribution Date specified at the time of the Eligible Employee's Deferral Election is irrevocable.
(e) The Distribution Date shall be the last day of the month that includes one of the following as specified by the Participant at the time of his Deferral Election:
(1) the earliest date following the Participant's Termination of Employment (as defined in subsection (f) below) on which the Participant is entitled to commence receiving retirement benefits under The St. Paul Companies, Inc. Employees' Retirement Plan;
(2) the Participant's Termination of Employment (as defined in subsection (f) below);
(3) a specified date (the "Designated Distribution Date"), which may include a specified date coinciding with or next following the Eligible Employee's Termination of Employment (e.g., December 31 coinciding with or next following the Eligible Employee's Termination of Employment); or
(4) the earliest to occur of (1) and (3), above, or (2) and (3), above, as elected by the Participant.
In addition, a Participant may elect, in his Deferral Election, to receive a distribution of his Deferral Account in the event the Participant becomes Disabled (as defined in Section 4.2 below).
(f) For purposes of this Plan, a "Termination of Employment" occurs in the month in which the person leaves the employ of the Company (including all subsidiaries and affiliates) by reason of a resignation, discharge, retirement, disability or death, provided that if such termination of employment is not reflected in the payroll processing report for any payroll period ending in such month, the Termination of Employment shall be deemed to occur in the next following month.
(g) At the time of the Participant's Deferral Election, the Participant must elect, in writing on such form as the Plan Administrator may prescribe, the form of payment of the Participant's Deferred Compensation Account. The Deferred Compensation Account may be paid in a single lump sum or in substantially equal annual installments over a period of up to ten years in accordance with Section 4.1.
(h) At the time of the Participant's Deferral Election, the Participant shall specify, in writing on such form as may be prescribed by the Plan Administrator, the manner in which income, gains, losses and expenses are credited or charged to a Participant's Deferred Compensation Accounts in accordance with Section 3.
(i) A Deferral Election filed with the Plan Administrator shall remain in effect for the current and all future Incentive Awards unless the Eligible Employee files a change in his Deferral Election. A change in Deferral Election will not be effective with respect to an Incentive Award unless the change in Deferral Election is filed with the Plan Administrator on or before November 30 of the calendar year immediately preceding the calendar year in which such Incentive Award is otherwise payable (December 15, 1997 with respect to Incentive Awards otherwise payable in 1998). Notwithstanding the foregoing, if a Participant receives a distribution on account of hardship under any qualified plan that is described in Section 401(k) of the Internal Revenue Code (the "Code") and which is maintained by the Company, an Employer or a commonly controlled entity (as defined in Code Sections 414(b) and (c)) of the Company or an Employer (a "401(k) Plan"), then no amounts may be deferred under the Plan for a period of 12 months following the date the Participant receives the distribution on account of hardship from the 401(k) Plan.
(j) A Participant may make a one-time election with respect to each Deferred Compensation Account after the Participant's Deferral Election with respect to such Deferred Compensation Account to extend the Distribution Date; provided that such election shall not be effective unless the Plan Administrator receives the election at least one year and one day before the Distribution Date elected by the Participant in his Deferral Election; and further provided, that an election under this Section 2.2(j) by a Section 16b Insider (as defined in Section 4.7) shall be conditioned upon the approval of the Committee and shall not be effective unless the Committee approves the election at least one year and one day before the Distribution Date elected by the Section 16b Insider in his Deferral Election.
Section 3
Deferred Compensation Accounts
3.1 Deferred Compensation Accounts. A bookkeeping account shall be established in the Participant's name for each year for which a Participant defers an Incentive Award pursuant to a Deferral Election ("Deferred Compensation Account"). Amounts deferred pursuant to a Deferral Election shall be credited to the Deferred Compensation Account as of the date (the "Deferral Crediting Date") on which, in the absence of a Deferral Election, the Participant would otherwise have received the deferred amounts.
3.2 Investment Income. A Participant's Deferred
Compensation Account will be credited with investment income and
gains and charged with investment losses and distributions as if
the Participant's Deferred Compensation Account was actually
invested in accordance with the Participant's investment
elections under Section 3.3 among the Investment Funds made
available for Participant directed investment in accordance with
Section 3.4.
3.3 Investment Elections. A Participant must make an investment election at the time of his Deferral Election. The investment election shall allocate the amounts deferred among the Investment Funds made available for Participant directed investment in accordance with Section 3.4. A Participant's investment election shall remain in effect with respect to each subsequent deferral until the Participant files a change in investment election with the Plan Administrator. A Participant may change his investment election either with respect to new deferrals credited after the change in investment election (in increments of 1%) or with respect to the investment allocation of all of the Participant's existing Deferred Compensation Accounts (in increments of 1%), as the Participant may elect.
A change in investment election must be filed with the Plan Administrator on a form prescribed by the Plan Administrator or, if the Plan Administrator establishes a telephonic voice response system for investment elections under the Plan, through such telephonic voice response system. A change in investment election will become effective as soon as practicable following the Plan Administrator's receipt of the change in investment election.
3.4 Investment Funds. The Plan Administrator shall designate two or more Investment Funds for Participant investment elections under the Plan. Except for the Company Stock Fund (as described below) each Investment Fund shall be a registered investment company (mutual fund). The Plan Administrator, in his sole discretion, may also designate a "Company Stock Fund" as an Investment Fund under the Plan. If the Plan Administrator designates a Company Stock Fund as an Investment Fund under the Plan, deferred amounts deemed invested in the Company Stock Fund shall be credited with investment income, gains and losses as if such amounts were contributed under The St. Paul Companies, Inc. Savings Plus Plan ("Savings Plus") and invested in the St. Paul Companies, Inc. Common Stock Fund under Savings Plus.
The Plan Administrator, in his sole discretion, may prospectively designate additional Investment Funds, replace Investment Funds or eliminate Investment Funds from time to time; provided that there must be at least two Investment Funds available under the Plan at all times.
If the Plan Administrator eliminates or replaces an Investment Fund (an "Eliminated Fund"), each Participant must file a change in investment election to redirect the investment of amounts which were deemed to be invested in the Eliminated Fund. This change in investment election must be filed prior to the first day on which the Eliminated Fund ceases to be an Investment Fund (the "Elimination Date"). If a Participant does not file a change in investment election before the Elimination Date, the amounts that were deemed to be invested in the Eliminated Fund immediately prior to the Elimination Date will be deemed to be invested in such Investment Fund (or among such Investment Funds) as the Plan Administrator, in his sole discretion, shall designate until such time as the Participant files a valid change in investment election.
3.5 Vesting. A Participant shall be fully vested at all times in the balance of his Deferred Compensation Account.
Section 4
Payment of Benefits
4.1 Time and Method of Payment. Payment of a Participant's
Deferred Compensation Account shall be made in the form of a
single lump sum or shall commence in the form of installments as
elected by the Participant in his Deferral Election.
Notwithstanding the foregoing, a Participant may make a one-time
election with respect to each Deferred Contribution Account to
change the form of payment previously elected by the Participant;
provided that such election shall not be effective unless the
election to change the form of payment is received by the Plan
Administrator at least one year and one day before the
Participant's Distribution Date; and further provided, that an
election under this Section 4.1 by a Section 16b Insider (as
defined in Section 4.7) shall be conditioned upon the approval of
the Committee and shall not be effective unless the Committee
approves the election at least one year and one day before the
Section 16b Insider's Distribution Date. A Participant who makes
an election pursuant to this Section 4.1 to receive payment of
his Deferred Compensation Account in the form of installments
shall designate the number of years, up to a maximum of ten
years, over which the installments will be paid.
If a Participant's Deferred Compensation Account is payable in a single lump sum, the payment shall be made within 30 days after the Participant's Distribution Date in an amount equal to the value of the Participant's Deferred Compensation Account as of the Distribution Date.
If a Participant's Deferred Compensation Account is payable in the form of installment payments, then the Participant's Deferred Compensation Account shall be paid in substantially equal annual installments over the period elected by the Participant; provided that the number of annual installments shall not exceed the Participant's Deferred Compensation Account balance as of the Distribution Date divided by $1,000 (rounded down to the next whole number). If the Participant's entire Deferred Compensation Account balance is less than $2,000 as of the Distribution Date it will be distributed in a single lump payment. The initial installment payment shall be paid within 30 days after the Participant's Distribution Date. Subsequent installment payments shall be paid within 30 days after each anniversary of the Participant's Distribution Date thereafter until the Participant's Deferred Compensation Account has been paid in full.
Each installment payment shall equal (i) the balance of the Participant's Deferred Compensation Account as of the Distribution Date (in the case of the first installment payment) and as of the applicable anniversary of the Distribution Date (in the case of subsequent installements), divided by (ii) the number of remaining installment payments.
4.2 Payment Upon Disability. If a Participant elects, in his Deferral Election, to receive a distribution in the event he becomes Disabled (as defined below) before his Distribution Date, payment of the Participant's Deferred Compensation Account shall be made or shall commence (in the form of payment elected by the Participant in accordance with Sections 2.2(g) and 4.1) within 45 days after the date on which the Plan Administrator determines that the Participant is Disabled ("Disability Date") based on the value of the Participant's Deferred Compensation Accounts as of the last day of the month that includes the Disability Date.
For purposes of this Section 4.2, a Participant shall be "Disabled" if he has a physical or mental condition resulting from a bodily injury, disease, or mental disorder, which renders the Participant incapable of engaging in any suitable gainful employment or occupation and such physical or mental condition is expected to be permanent and continuous during the remainder of the Participant's life. Such determination shall be made by the Plan Administrator on the basis of such medical and other competent evidence as the Plan Administrator shall deem relevant.
4.3 Payment Upon Death of a Participant. Notwithstanding any election by the Participant regarding the timing and manner of payment of his Deferred Compensation Account, a Participant's Deferred Compensation Account shall be paid to the Participant's Beneficiary (designated in accordance with Section 4.4) in a single lump sum as soon as practical following the Participant's death.
4.4 Beneficiary. A Participant's Beneficiary or Beneficiaries shall be the beneficiary or beneficiaries designated by the Participant under the Company's group life insurance plan. If no Beneficiary is named by a Participant under the Company's group life insurance plan, or if he survives all of his named beneficiaries, the Deferred Compensation Account shall be paid to the Participant's estate.
4.5 Form of Payment. All payments shall be made in cash.
4.6 Withholding of Taxes. The Company shall withhold any applicable Federal, state or local income tax from payments due under the Plan. The Company shall also withhold Social Security taxes, including the Medicare portion of such taxes, and any other employment taxes as necessary to comply with applicable laws.
4.7 Limitations for Section 16b Insiders. A "Section 16b
Insider" shall include any Participant who has been deemed to be
subject to Section 16 of the Securities and Exchange Act of 1934
(the "Exchange Act") by the Board of Directors. Notwithstanding
any provision of the Plan, the Plan Administrator may impose such
limitations and restrictions on the Section 16b Insiders'
investment and deferral elections under Sections 2.2 and 3.3 and
elections with respect to the form of payment under Section 4.1
as he deems necessary or appropriate so that transactions by
Section 16b Insiders do not present a risk of possible liability
under Section 16b of the Exchange Act.
Section 5
Miscellaneous
5.1 Funding. Benefits payable under the Plan to any Participant shall be paid directly by the Participant's Employer (including the Company if the Participant is employed by the Company). No Employer (including the Company) shall have any obligation to pay any benefits under the Plan with respect to an employee of any other Employer. The Company and the Employers shall not be required to fund, or otherwise segregate assets to be used for payment of benefits under the Plan. While the Company and the Employers may make investments (a) in shares of Company Stock through open market purchases or (b) in other investments in amounts equal or unequal to Participants' investment elections hereunder, the Company and the Employers shall not be under any obligation to make such investments and any such investment shall remain an asset of the Company or the Employer subject to the claims of its general creditors. Notwithstanding the foregoing, the Company and the Employers, in the discretion of the Board of Directors or the Committee, may maintain one or more grantor trusts ("Trust") to hold assets to be used for payment of benefits under the Plan. The assets of the Trust with respect to benefits payable to the employees of an Employer shall remain subject to the claims of such Employer's general creditors. Any payments by a Trust of benefits provided to a Participant under the Plan shall be considered payment by the Company or the Employer and shall discharge the Company or the Employer of any further liability under the Plan for such payments.
5.2 Benefit Statements. As soon as practical after the end of each calendar quarter (or after such additional date or dates as the Plan Administrator, in his discretion, may designate), the Plan Administrator shall provide each Participant with a statement of the balance of each of his Deferred Compensation Accounts hereunder as of the last day of such calendar quarter (or as of such other dates as the Plan Administrator, in his discretion may designate).
5.3 Employment Rights. Establishment of the Plan shall not be construed to give any Eligible Employee the right to be retained in the Company's or any Employer's service or to any benefits not specifically provided by the Plan.
5.4 Interests Not Transferable. Except as to withholding of any tax under the laws of the United States or any state or locality and the provisions of Section 4.4, no benefit payable at any time under the Plan shall be subject in any manner to alienation, sale, transfer, assignment, pledge, attachment, or other legal process, or encumbrance of any kind. Any attempt to alienate, sell, transfer, assign, pledge or otherwise encumber any such benefits, whether currently or thereafter payable, shall be void. No person shall, in any manner, be liable for or subject to the debts or liabilities of any person entitled to such benefits. If any person shall attempt to, or shall alienate, sell, transfer, assign, pledge or otherwise encumber his benefits under the Plan, or if by any reason of his bankruptcy or other event happening at any time, such benefits would devolve upon any other person or would not be enjoyed by the person entitled thereto under the Plan, then the Plan Administrator, in his discretion, may terminate the interest in any such benefits of the person entitled thereto under the Plan and hold or apply them for or to the benefit of such person entitled thereto under the Plan or his spouse, children or other dependents, or any of them, in such manner as the Plan Administrator may deem proper.
5.5 Forfeitures and Unclaimed Amounts. Unclaimed amounts shall consist of the amounts of the Deferred Compensation Account of a Participant that cannot be distributed because of the Plan Administrator's inability, after a reasonable search, to locate a Participant or his Beneficiary, as applicable, within a period of two (2) years after the date upon which the payment of benefits become due. Unclaimed amounts shall be forfeited at the end of such two-year period. These forfeitures will reduce the obligations of the Company under the Plan. After an unclaimed amount has been forfeited, the Participant or Beneficiary, as applicable, shall have no further right to his Deferred Compensation Account.
5.6 Controlling Law. The law of Minnesota, except its law with respect to choice of law, shall be controlling in all matters relating to the Plan to the extent not preempted by ERISA.
5.7 Gender and Number. Words in the masculine gender shall include the feminine, and the plural shall include the singular and the singular shall include the plural.
5.8 Action by the Company. Except as otherwise specifically provided herein, any action required of or permitted by the Company under the Plan shall be by resolution of either the Board of Directors or the Committee or by action of such person(s) authorized by resolution of the Board of Directors or the Committee.
Section 6
Employer Participation
6.1 Adoption of Plan. Any subsidiary or affiliate of the Company (an "Employer") may, with the approval of the Board of Directors or the Committee and under such terms and conditions as the Board of Directors or Committee may prescribe, adopt the Plan by resolution of the Employer's board of directors. An adopting Employer shall not have the authority to amend or terminate the Plan under Section 7.
6.2 Withdrawal from the Plan by Employer. Any such Employer shall have the right, at any time, upon the approval of and under such conditions as may be provided by the Board of Directors or the Committee, to withdraw from the Plan by delivering to the Board of Directors or the Committee written notice of its election so to withdraw. The portion of the Trust assets attributable to amounts deferred while Participants were employees of such withdrawing Employer shall be disposed of in accordance with the terms of the Trust.
Section 7
Amendment and Termination
The Company intends the Plan to be permanent, but reserves the right at any time to modify, amend or terminate the Plan, provided, however, that any amendment or termination of the Plan shall not reduce or eliminate any Deferred Compensation Account accrued through the date of such amendment or termination. Upon termination of the Plan, the Company may elect either (a) to continue making payments of Deferred Compensation Accounts in accordance with the terms of the Deferral Elections in effect at the time of the termination and crediting Participant's Deferred Compensation Accounts with income and gains and charging their Deferred Compensation Accounts for losses and distributions in accordance with Section 3.2, or (b) to distribute the Participant's Deferred Compensation Accounts in a single lump sum.
THE ST. PAUL COMPANIES, INC.
By: /s/ Greg A. Lee
---------------
Greg A. Lee
Title: Senior Vice President -
Human Resources
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Exhibit 10(b)
THE ST. PAUL COMPANIES, INC.
DIRECTORS' DEFERRED COMPENSATION PLAN
(As Amended and Restated Effective as of January 1, 1998)
Section 1
Introduction
1.1 The Plan and Its Effective Date. The St. Paul Companies, Inc. Directors' Deferred Compensation Plan ("Plan") was established as of January 1, 1986. The effective date of the amendment and restatement of the Plan as set forth herein is January 1, 1998.
1.2 Purpose. The St. Paul Companies, Inc. (the "Company") has established the Plan for its nonemployee directors to retain and attract highly qualified individuals to serve as directors by offering the benefits of a non-qualified, unfunded plan of deferred compensation.
1.3 Administration. The Plan shall be administered by the Plan Administrator who shall be appointed by the Personnel and Compensation Committee (the "Committee") of the board of directors of the Company (the "Board of Directors"). In the absence of the appointment of a Plan Administrator, the officer of the Company having direct responsibility for compensation and benefits shall be the Plan Administrator. The Plan Administrator shall have the authority to delegate, from time to time, his responsibilities under the Plan to such person or persons as he deems advisable and may revoke any such delegation of responsibility. Any action by the delegate in the exercise of delegated responsibilities shall have the same force and effect as if such action was taken by the Plan Administrator.
Section 2
Participation and Deferral Elections
2.1 Eligibility and Participation. Subject to the conditions and limitations of the Plan, nonemployee members of the Board of Directors ("Eligible Directors") shall be eligible to participate in the Plan. Any Eligible Director who makes a Deferral Election as described in Section 2.2 below shall become a participant in the Plan ("Participant") and shall remain a Participant until the entire balance of all his Deferred Compensation Accounts (defined in Section 3.1 below) is distributed to him.
2.2 Rules for Deferral Elections. Any Eligible Director may make an irrevocable election ("Deferral Election") to defer receipt of all or any percentage of his annual fees and/or meeting fees (collectively "Fees") payable for a calendar year ("Attendance Year") by the Company in accordance with the rules set forth below:
(a) An individual shall be eligible to make a Deferral Election only if he is an Eligible Director on the date such election is made.
(b) The minimum amount that may be deferred for any year is $1,000. If the amount or percentage specified for deferral in an Eligible Director's Deferral Election would result in the deferral of less than $1,000, the amount or percentage of Fees specified in the Deferral Election will not be deferred hereunder but will be paid to the Eligible Director at the time that such Fees are otherwise payable.
(c) All Deferral Elections must be made in writing on such form as the Plan Administrator may prescribe and must be received by the Plan Administrator no later than December 31 of the calendar year immediately preceding the Attendance Year for which such Fees are otherwise payable. In addition, an individual may file a Deferral Election for the Attendance Year in which he becomes an Eligible Director at any time prior to the commencement of his term as an Eligible Director.
(d) Amounts will be deferred to the last day of the month specified by the Eligible Director at the time of his Deferral Election (the "Distribution Date") and payment will be made or will commence within 30 days after the Distribution Date. Except as provided in subsection (h), the Distribution Date specified at the time of the Eligible Director's Deferral Election is irrevocable.
(e) At the time of the Participant's Deferral Election, the Participant must elect, in writing on such form as the Plan Administrator may prescribe, the form of payment of the Participant's Deferred Compensation Account. The Deferred Compensation Account may be paid in a single lump sum or in substantially equal annual installments over a period of up to ten years in accordance with Section 4.1.
(f) At the time of the Participant's Deferral Election, the Participant shall specify, in writing on such form as may be prescribed by the Plan Administrator, the manner in which income, gains, losses and expenses are credited or charged to a Participant's Deferred Compensation Accounts in accordance with Section 3.
(g) A Deferral Election filed with the Plan Administrator shall remain in effect for all future Attendance Years unless the Eligible Director files a change in his Deferral Election. A change in Deferral Election will not be effective with respect to an Attendance Year unless the change in Deferral Election is filed with the Plan Administrator on or before December 31 of the calendar year immediately preceding the Attendance Year.
(h) A Participant may make a one-time election with
respect to each Deferred Compensation Account after the
Participant's Deferral Election with respect to such
Deferred Compensation Account to extend the
Distribution Date; provided that an election under this
Section 2.2(h) shall be conditioned upon the approval
of the Committee and shall not be effective unless the
Committee approves the election at least one year and
one day before the Distribution Date elected by the
Participant in his Deferral Election.
Section 3
Deferred Compensation Accounts
3.1 Deferred Compensation Accounts. A bookkeeping account shall be established in the Participant's name for each Attendance Year for which a Participant defers Fees pursuant to a Deferral Election ("Deferred Compensation Account"). Amounts deferred pursuant to a Deferral Election shall be credited to the Deferred Compensation Account as of the date (the "Deferral Crediting Date") on which, in the absence of a Deferral Election, the Participant would otherwise have received the Fees.
3.2 Investment Income. A Participant's Deferred
Compensation Account will be credited with investment income and
gains and charged with investment losses and distributions as if
the Participant's Deferred Compensation Account was actually
invested in accordance with the Participant's investment
elections under Section 3.3 among the Investment Funds made
available for Participant directed investment in accordance with
Section 3.4.
3.3 Investment Elections. A Participant must make an investment election at the time of his Deferral Election. The investment election shall allocate the amounts deferred among the Investment Funds made available for Participant directed investment in accordance with Section 3.4. A Participant's investment election shall remain in effect with respect to each subsequent deferral until the Participant files a change in investment election with the Plan Administrator. A Participant may change his investment election either with respect to new deferrals credited after the change in investment election (in increments of 1%) or with respect to the investment allocation of all of the Participant's existing Deferred Compensation Accounts (in increments of 1%), as the Participant may elect.
A change in investment election must be filed with the Plan Administrator on a form prescribed by the Plan Administrator or, if the Plan Administrator establishes a telephonic voice response system for investment elections under the Plan, through such telephonic voice response system. A change in investment election will become effective as soon as practicable following the Plan Administrator's receipt of the change in investment election.
3.4 Investment Funds. The Plan Administrator shall designate two or more Investment Funds for Participant investment elections under the Plan. Except for the Company Stock Fund (as described below) each Investment Fund shall be a registered investment company (mutual fund). The Plan Administrator, in his sole discretion, may also designate a "Company Stock Fund" as an Investment Fund under the Plan. If the Plan Administrator designates a Company Stock Fund as an Investment Fund under the Plan, deferred amounts deemed invested in the Company Stock Fund shall be credited with investment income, gains and losses as if such amounts were contributed under The St. Paul Companies, Inc. Savings Plus Plan ("Savings Plus") and invested in the St. Paul Companies, Inc. Common Stock Fund under Savings Plus.
The Plan Administrator, in his sole discretion, may prospectively designate additional Investment Funds, replace Investment Funds or eliminate Investment Funds from time to time; provided that there must be at least two Investment Funds available under the Plan at all times.
If the Plan Administrator eliminates or replaces an Investment Fund (an "Eliminated Fund"), each Participant must file a change in investment election to redirect the investment of amounts which were deemed to be invested in the Eliminated Fund. This change in investment election must be filed prior to the first day on which the Eliminated Fund ceases to be an
Investment Fund (the "Elimination Date"). If a Participant does not file a change in investment election before the Elimination Date, the amounts that were deemed to be invested in the Eliminated Fund immediately prior to the Elimination Date will be deemed to be invested in such Investment Fund (or among such Investment Funds) as the Plan Administrator, in his sole discretion, shall designate until such time as the Participant files a valid change in investment election.
3.5 Vesting. A Participant shall be fully vested at all times in the balance of his Deferred Compensation Account.
Section 4
Payment of Benefits
4.1 Time and Method of Payment. Payment of a Participant's
Deferred Compensation Account shall be made in the form of a
single lump sum or shall commence in the form of installments as
elected by the Participant in his Deferral Election.
Notwithstanding the foregoing, a Participant may make a one-time
election with respect to each Deferred Contribution Account to
change the form of payment previously elected by the Participant;
provided that an election under this Section 4.1 shall be
conditioned upon the approval of the Committee and shall not be
effective unless the Committee approves the election at least one
year and one day before the Eligible Director's Distribution
Date. A Participant who makes an election pursuant to this
Section 4.1 to receive payment of his Deferred Compensation
Account in the form of installments shall designate the number of
years, up to a maximum of ten years, over which the installments
will be paid.
If a Participant's Deferred Compensation Account is payable in a single lump sum, the payment shall be made within 30 days after the Participant's Distribution Date in an amount equal to the value of the Participant's Deferred Compensation Account as of the Distribution Date.
If a Participant's Deferred Compensation Account is payable in the form of installment payments, then the Participant's Deferred Compensation Account shall be paid in substantially equal annual installments over the period elected by the Participant; provided that the number of annual installments shall not exceed the Participant's Deferred Compensation Account balance as of the Distribution Date divided by $1,000 (rounded down to the next whole
number). If the Participant's entire Deferred Compensation Account balance is less than $2,000 as of the Distribution Date it will be distributed in a single lump payment. The initial installment payment shall be paid within 30 days after the Participant's Distribution Date. Subsequent installment payments shall be paid within 30 days after each anniversary of the Participant's Distribution Date until the Participant's Deferred Compensation Account has been paid in full.
Each installment payment shall equal (i) the balance of the Participant's Deferred Compensation Account as of the Distribution Date (in the case of the first installment payment) and as of the applicable anniversary of the Distribution Date (in the case of subsequent installments), divided by (ii) the number of remaining installment payments.
4.2 Payment Upon Death of a Participant. Notwithstanding any election by the Participant regarding the timing and manner of payment of his Deferred Compensation Account, a Participant's Deferred Compensation Account shall be paid to the Participant's Beneficiary (designated in accordance with Section 4.3) in a single lump sum as soon as practical following the Participant's death.
4.3 Beneficiary. A Participant may designate a Beneficiary or Beneficiaries to receive the balance of the Participant's Deferral Account in the event the Participant dies before the payment of his entire Deferred Compensation Account by filing a written Beneficiary designation with the Plan Administrator on such form as the Plan Administrator may prescribe. A Participant may revoke an existing Beneficiary designation by filing another written Beneficiary designation with the Plan Administrator. The latest Beneficiary designation received by the Committee shall be controlling.
If no Beneficiary is named by a Participant or if he survives all of his named Beneficiaries, the Deferral Account shall be paid in the following order of precedence:
(1) the Participant's spouse;
(2) the Participant's children (including adopted children), per stirpes; or
(3) the Participant's estate.
4.4 Form of Payment. All payments shall be made in cash.
4.5 Withholding of Taxes. The Company may withhold from payments due under the Plan such amount as it deems proper to protect the Company against liability for the payment of any applicable Federal, state or local income or other taxes.
4.6 Limitations for Section 16b Insiders. Notwithstanding any provision of the Plan, the Plan Administrator may impose such limitations and restrictions on Participants' investment and deferral elections under Sections 2.2 and 3.3 and elections with respect to the form of payment under Section 4.1 as he deems necessary or appropriate so that transactions by Participants do not present a risk of possible liability under Section 16b of the Securities and Exchange Act of 1934.
Section 5
Miscellaneous
5.1 Funding. Benefits payable under the Plan to any Participant shall be paid directly by the Company. The Company shall not be required to fund, or otherwise segregate assets to be used for payment of benefits under the Plan. While the Company may make investments (a) in shares of Company Stock through open market purchases or (b) in other investments in amounts equal or unequal to Participants' investment elections hereunder, the Company shall not be under any obligation to make such investments and any such investment shall remain an asset of the Company subject to the claims of its general creditors. Notwithstanding the foregoing, the Company may maintain one or more grantor trusts ("Trust") to hold assets to be used for payment of benefits under the Plan. The assets of the Trust shall remain subject to the claims of the Company's general creditors. Any payments by a Trust of benefits provided to a Participant under the Plan shall be considered payment by the Company and shall discharge the Company of any further liability under the Plan for such payments.
5.2 Benefit Statements. As soon as practical after the end of each calendar quarter (or after such additional date or dates as the Plan Administrator, in his discretion, may designate), the Plan Administrator shall provide each Participant with a statement of the balance of each of his Deferred Compensation Accounts hereunder as of the last day of such calendar quarter (or as of such other dates as the Plan Administrator, in his discretion may designate).
5.3 Interests Not Transferable. Except as to withholding of any tax under the laws of the United States or any state or locality and the provisions of Section 4.3, no benefit payable at any time under the Plan shall be subject in any manner to alienation, sale, transfer, assignment, pledge, attachment, or other legal process, or encumbrance of any kind. Any attempt to alienate, sell, transfer, assign, pledge or otherwise encumber any such benefits, whether currently or thereafter payable, shall be void. No person shall, in any manner, be liable for or subject to the debts or liabilities of any person entitled to such benefits. If any person shall attempt to, or shall alienate, sell, transfer, assign, pledge or otherwise encumber his benefits under the Plan, or if by any reason of his bankruptcy or other event happening at any time, such benefits would devolve upon any other person or would not be enjoyed by the person entitled thereto under the Plan, then the Plan Administrator, in his discretion, may terminate the interest in any such benefits of the person entitled thereto under the Plan and hold or apply them for or to the benefit of such person entitled thereto under the Plan or his spouse, children or other dependents, or any of them, in such manner as the Plan Administrator may deem proper.
5.4 Forfeitures and Unclaimed Amounts. Unclaimed amounts shall consist of the amounts of the Deferred Compensation Account of a Participant that cannot be distributed because of the Plan Administrator's inability, after a reasonable search, to locate a Participant or his Beneficiary, as applicable, within a period of two (2) years after the date upon which the payment of benefits become due. Unclaimed amounts shall be forfeited at the end of such two-year period. These forfeitures will reduce the obligations of the Company under the Plan. After an unclaimed amount has been forfeited, the Participant or Beneficiary, as applicable, shall have no further right to his Deferred Compensation Account.
5.5 Controlling Law. The law of Minnesota, except its law with respect to choice of law, shall be controlling in all matters relating to the Plan to the extent not preempted by ERISA.
5.6 Gender and Number. Words in the masculine gender shall include the feminine, and the plural shall include the singular and the singular shall include the plural.
5.7 Action by the Company. Except as otherwise specifically provided herein, any action required of or permitted by the Company under the Plan shall be by resolution of either the Board of Directors or the Committee or by action of such person(s) authorized by resolution of the Board of Directors or the Committee.
Section 6
Amendment and Termination
The Company intends the Plan to be permanent, but reserves the right at any time to modify, amend or terminate the Plan, provided, however, that any amendment or termination of the Plan shall not reduce or eliminate any Deferred Compensation Account accrued through the date of such amendment or termination. Upon termination of the Plan, the Company may elect either (a) to continue making payments of Deferred Compensation Accounts in accordance with the terms of the Deferral Elections in effect at the time of the termination and crediting Participant's Deferred Compensation Accounts with income and gains and charging their Deferred Compensation Accounts for losses and distributions in accordance with Section 3.2, or (b) to distribute the Participant's Deferred Compensation Accounts in a single lump sum.
THE ST. PAUL COMPANIES, INC.
By: /s/ Greg A. Lee
---------------
Greg A. Lee
Title: Senior Vice President-
Human Resources
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Exhibit 10(c)
PROMISSORY NOTE
$178,750.00 September 30, 1997
I, James F. Duffy, for value received promise to pay to St. Paul Fire and Marine Insurance Company ("St. Paul") or order at St. Paul, Minnesota the sum of One Hundred Seventy-Eight Thousand Seven Hundred Fifty and no Dollars with interest from the date of this Promissory Note until paid, at the rate to be determined for the first 6 months of each calendar year by using the U.S. Department of Treasury short-term applicable federal rate for demand loans as of the first business day of January and the rate to be determined for the last 6 months of each calendar year by using the U.S. Department of Treasury short-term applicable federal rate for demand loans as of the first business day of June.
This Promissory Note is payable on demand and, in all events, shall be due and payable on February 15, 2001. Payments shall be made in installments according to the following schedule:
February 15, 1998 Principal of $48,750 plus interest
computed at the above-described rate.
February 15, 1999 Principal of $48,750 plus interest
computed at the above-described rate.
February 15, 2000 Principal of $48,570 plus interest
computed at the above-described rate.
February 15, 2001 Remainder of outstanding balance
plus all accrued interest.
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Should interest not be paid when due, it shall bear interest at the same rate as the principal.
If I am in default, the holder of this Promissory Note may send me written notice telling me if I do not pay the overdue amount by a certain date, at least 30 days after the date on which the notice is delivered or mailed to me, I may be required to pay immediately the full amount of principal which has not been paid and all the interest that I owe on that amount.
In the event I voluntarily terminate my employment with St. Paul Fire and Marine Insurance Company and its affiliated companies prior to the payment in full of the loan, at the option of St. Paul the outstanding balance plus accrued interest shall immediately become due and payable.
In the event of involuntarily termination of my employment with St. Paul Fire and Marine Insurance Company or an affiliated company, at the option of St. Paul the outstanding balance plus accrued interest shall immediately become due and payable.
Even if, at a time when I am in default, the holder of this Promissory Note does not require me to pay immediately in full as described above, the holder will still have the right to do so if I am in default at a later time.
This Promissory Note is governed by the laws of the State of Minnesota.
I waive the right of presentment requiring the holder of this Promissory Note to demand payment of amounts due.
/s/ James F. Duffy 11/19/97
-----------------------------
James F. Duffy
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Exhibit 10(d)
THE ST. PAUL COMPANIES, INC.
1994 STOCK INCENTIVE PLAN
1. Purpose. The purposes of The St. Paul Companies, Inc. 1994 Stock Incentive Plan (the "Plan") are (i) to promote the interests of The St. Paul Companies, Inc. (the "Company") and its shareholders by attracting and retaining key officers and Non- Employee Directors of the Company and its subsidiaries upon whom major responsibilities rest for the successful administration and management of the Company's business, (ii) to provide such officers and Non-Employee Directors with incentive-based compensation in the form of Company stock, which is supplemental to any other compensation or benefit plans, based upon the Company's sustained financial performance, (iii) to encourage decision making based upon long-term goals and (iv) to align the interest of such officers and Non-Employee Directors with that of the Company's shareholders by encouraging them to acquire a greater ownership position in the Company.
2. Definitions. Wherever used herein, the following terms shall have the respective meanings set forth below:
"Award" means an award to a Participant made in accordance with the terms of the Plan.
"Board" means the Board of Directors of the Company.
"Committee" means the Executive Compensation Committee of the Board, or a subcommittee of that committee.
"Common Stock" means the common stock of the Company.
"Disinterested Person" means "disinterested person" as defined in Rule 16b-3 of the Securities and Exchange Commission, as amended from time to time, and, generally, means any member of the Board who is not at the time of acting on a matter, and within the previous year has not been, an officer of the Company or a subsidiary.
"Participant" means an employee of the Company or its subsidiaries who is selected by the Committee to participate in the Plan or a Non-Employee Director who is granted options under the provisions of Section 20 and/or Section 21 of the Plan.
3. Shares Subject to the Plan. Subject to adjustment as provided in Section 16, the number of shares of Common Stock which shall be available and reserved for the grant of Awards under the Plan shall not exceed four million (4,000,000). The shares of Common Stock issued under the Plan will come from authorized and unissued shares. Shares of Common Stock subject to an Award that expires unexercised, that is forfeited, terminated or canceled, in whole or in part, shall thereafter again be available for grant under the Plan. No more than twenty per cent (20%) of all shares subject to the Plan may be granted to Participants as restricted stock.
4. Administration. The Plan shall be administered by the Committee. A majority of the Committee shall constitute a quorum, and the acts of a majority shall be the acts of the Committee.
Subject to the provisions of the Plan and except where inconsistent with the provisions of Section 20, 21 and 22 of the Plan, the Committee shall (i) select the Participants, determine the type of Awards to be made to Participants, determine the shares subject to Awards, and (ii) have the authority to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the administration of the Plan, to determine the terms and provisions of any agreements entered into hereunder, and to make all other determinations necessary or advisable for the administration of the Plan. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award in the manner and to the extent it shall deem desirable to carry it into effect. The determinations of the Committee in the administration of the Plan, as described herein, shall be final and conclusive.
5. Eligibility. Non-Employee Directors shall become Participants under the provisions of Section 20 of the Plan and may become Participants under Section 21 of the Plan. In addition, the Committee shall select from time to time as Participants in the Plan such officers of the Company or its subsidiaries who are responsible for the management of the Company or a subsidiary or who are expected to contribute in a substantial measure to the successful performance of the Company. No employee shall have at any time the right (i) to be selected as a Participant, (ii) to be entitled to an Award, or (iii) having been selected for an Award, to receive any further Awards.
6. Awards. Awards under the Plan may consist of: stock
options (either incentive stock options, within the meaning of
Section 422 of the Internal Revenue Code, or nonstatutory stock
options), Rights and restricted stock. Awards of restricted
stock may provide the Participant with dividends or dividend
equivalents and voting rights prior to vesting (whether based on
a period of time or based on attainment of specified performance
conditions).
7. Stock Options. The Committee shall establish the option price at the time each stock option is granted, which price shall not be less than the closing price of a share of the Common Stock on the New York Stock Exchange on the date of grant, or the fair market value of a share of the Common Stock if it is not so listed, as determined by the Committee. Stock options shall be exercisable for such period as specified by the Committee, but in no event may options become exercisable less than one year after the date of grant (except in the case of a Change of Control) or be exercisable for a period of more than ten (10) years after their date of grant. The option price of each share as to which a stock option is exercised shall be paid in full at the time of such exercise. Such payment shall be made in cash (including check, bank draft or money order), by tender of shares of Common Stock owned by the Participant valued at fair market value as of the date of exercise, subject to such guidelines for the tender of Common Stock as the Committee may establish, in such other consideration as the Committee deems appropriate, or by a combination of cash, shares of Common Stock and such other consideration. No Participant may be granted Awards of stock options with respect to more than eight hundred thousand (800,000) shares of Common Stock during the term of the Plan, subject to adjustment as provided in Section 16.
8. Stock Appreciation Rights. Stock appreciation, or similar rights (each a "Right") may be granted either concurrently with or subsequent to the date of grant of the related stock option. A Right shall entitle the Participant to receive from the Company an amount equal to the increase of the fair market value of one (1) share of Common Stock on the date of exercise of the Right over the fair market value of one (1) share of Common Stock on the date of grant. The Committee shall determine in its sole discretion whether the Right shall be settled in cash, Common Stock or a combination of cash and Common Stock. In no event may Rights with respect to more than eight hundred thousand (800,000) shares of Common Stock in the aggregate be granted to any Participant during the term of the Plan, subject to adjustment as provided in Section 16.
9. Termination of Stock Options and Rights. Each option and any related Rights shall terminate:
If the Participant is then living, at the earliest of the following times:
(i) ten (10) years after the date of grant of the option;
(ii) three (3) years after termination of employment because of retirement;
(iii) one (1) month after termination of employment other than termination because of retirement or through discharge for cause provided, however, that if any option is not fully exercisable at the time of such termination of employment, such option shall expire on the date of such termination of employment to the extent not then exercisable;
(iv) immediately upon termination of employment through discharge for cause; or
(v) any other time set forth in the agreement describing and setting the terms of the Award, which time shall not exceed ten (10) years after the date of grant.
If the Participant dies while employed by the Company or any
subsidiary, or if no longer so employed dies prior to
termination of the entire option under Section 9 (ii) or
(iii) hereof, the Participant's options and Rights shall
terminate one (1) year after the date of death, but subject
to earlier termination pursuant to Section 9 (i) or (v).
However, notwithstanding the provisions of Section 9 (v), to
the extent an option is exercisable on the date of the
Participant's death, it shall remain exercisable until the
earlier of one hundred eighty (180) days following the date
of death or ten (10) years after the date of grant. To the
extent an option is exercisable after the death of the
Participant, it may be exercised by the person or persons to
whom the Participant's rights under the agreement have
passed by will or by the applicable laws of descent and
distribution.
10. Restricted Stock. Restricted stock may be granted in the form of actual shares of Common Stock which shall be evidenced by a certificate registered in the name of the Participant but held by the Company until the end of the restricted period. Any employment conditions, performance conditions and the length of the period for vesting of restricted stock shall be established by the Committee in its discretion. In no event will Awards of restricted stock to any one Participant total more than one hundred thousand (100,000) shares of Common Stock during the term of the Plan, subject to adjustment as provided in Section 16. Any performance conditions applied to any Award of restricted stock may include earnings per share, net income, operating income, total shareholder return, market share, return on equity, achievement of profit or revenue targets by a business unit, or any combination thereof. No Award of restricted stock may vest earlier than one year from the date of grant (except in the case of a Change of Control).
11. Agreements. Each Award under the Plan shall be evidenced by an agreement setting forth the terms and conditions, as determined by the Committee, which shall apply to such Award, in addition to the terms and conditions specified in the Plan.
12. Change of Control. In the event of a Change of Control, as hereinafter defined, (i) all Rights shall become exercisable in full, (ii) the restrictions applicable to all shares of restricted stock shall lapse and such shares shall be deemed fully vested; and (iii) subject to any limitations set forth in agreements documenting any stock option Awards, all stock options shall become immediately exercisable in full. The Committee may, in its discretion, include such further provisions and limitations in any agreement documenting such Awards as it may deem equitable and in the best interests of the Company.
"Change of Control" means a change of control of the Company of a nature that would be required to be reported (assuming such event has not been "previously reported") in response to Item 1(a) of the Current Report on Form 8-K, as in effect on May 3, 1994, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934; provided that, without limitation, such a change in control shall be deemed to have occurred at such time as (a) any "person" within the meaning of Section 14(d) of the Securities Exchange Act of 1934, other than the Company, a subsidiary or any employee benefit plan(s) sponsored by the Company or any subsidiary is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of fifty per cent (50%) or more of the Common Stock; or (b) individuals who constitute the Board on May 3, 1994, cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to May 3, 1994, whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least three quarters of the directors comprising the Board on May 3, 1994 (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be, for purposes of this clause (b), considered as though such person were a member of the Board on May 3, 1994.
13. Withholding. The Company and its subsidiaries shall have the right to deduct from any payment to be made pursuant to the Plan, or to require prior to the issuance or delivery of any shares of Common Stock or the payment of cash under the Plan, any taxes required by law (whether federal, state, local or foreign) to be withheld therefrom. The Committee may, in its discretion, permit a Participant to elect to satisfy such withholding obligation by having the Company retain the number of shares of Common Stock whose fair market value equals the amount required to be withheld. Any fraction of a share of Common Stock required to satisfy such obligation shall be disregarded and the amount due shall instead be paid in cash to the Participant.
14. Nontransferability. No amount payable or other right under the Plan shall be subject in any manner to alienation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind nor in any manner be subject to the debts or liabilities of any person, except by will or the laws of descent and distribution, and any attempt to so alienate or subject any such amount, whether presently or thereafter payable, or any such right shall be void.
15. No Right to Employment. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continue in the employ of the Company or its subsidiaries. Further, the Company and its subsidiaries expressly reserve the right at any time to dismiss a Participant without any liability, or any claim under the Plan, except as provided herein or in any agreement entered into hereunder.
16. Adjustment of and Changes in Common Stock. In the event of any stock dividend or split, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other change in the corporate structure or shares of stock of the Company, or any distributions to common shareholders other than regular cash dividends, the Committee may make such substitution or adjustment, if any, as it deems to be equitable, as to the number or kind of shares of Common Stock or other securities issued or reserved for issuance pursuant to the Plan and to outstanding Awards.
17. Amendment. The Board may amend, suspend or terminate
the Plan or any portion thereof at any time, provided that (i) no
amendment shall be made without stockholder approval if such
approval is necessary in order for the Plan to continue to comply
with Rule 16b-3 under the Securities Exchange Act of 1934 and
(ii) no amendment, suspension or termination may adversely affect
any outstanding Award without the consent of the Participant to
whom such Award was made. Section 20 of this Plan may not be
amended more than once every six months, other than to comport
with changes in the Internal Revenue Code, the Employee
Retirement Income Security Act, or the rules thereunder.
18. Governing Law. The Plan shall be construed and its provisions enforced and administered in accordance with the laws of the State of Minnesota.
19. Effective Date. The Plan shall be effective as of May 4, 1994. Subject to earlier termination pursuant to Section 17, the Plan shall have a term of ten (10) years from its effective date.
20. Automatic Grant to Non-Employee Directors. Commencing with the first meeting of the Board in November 1994, each year on the date of the first meeting of the Board in November of each such year, each Non-Employee Director who is a director of the Company as of such date shall, without any Committee action, automatically be granted a stock option to purchase one thousand (1,000) shares [effective for the first meeting of the Board in November 1997 one thousand five hundred (1,500) shares] of Common Stock (subject to adjustment upon changes in capitalization of the Company as provided in Section 16 of the Plan). Each such option shall be evidenced by and subject to the provisions of an agreement setting forth the terms described in Section 22 and such additional terms of the Plan as are not inconsistent with the terms of Section 22.
21. Discretionary Grant to Non-Employee Directors. The
Board may, subsequent to the effective date of the Plan, permit
Non-Employee Directors to choose to receive all or a portion of
their basic annual retainer in the form of stock options valued
in accordance with a method deemed appropriate by the Committee.
Each such option shall be evidenced by and subject to the
provisions of an agreement setting forth the terms described in
Section 22 and such additional terms of the Plan as are not
inconsistent with the terms of Section 22.
22. Non-Employee Director Options. Options granted
pursuant to Section 20 or 21 shall have an exercise price per
share equal to 100% of the fair market value of one (1) share of
Common Stock on the date the option is granted, shall become
exercisable in full one (1) year after the date of grant, and
shall remain exercisable until terminated in accordance with
Section 9 of the Plan, provided that (i) Section 9(iii) shall be
applied without regard to the words "or through discharge for
cause," (ii) Sections 9(iv) and (v) shall not be applicable and
(iii) references in Section 9 to "employment" and "termination of
employment" shall, for the purposes of Sections 20 and 21, refer
to "service as a director" and "termination of service as a
director."
Payment of the exercise price of the shares to be purchased under options granted under Section 20 and 21 must be made in cash only (including check, bank draft or money order) at the time of exercise of such option.
The provisions of Sections 20 and 21 shall control with respect to options granted under either Section 20 or 21, respectively, over any other inconsistent provisions of the Plan. It is intended that the provisions of Sections 20 and 21 shall not cause the Non-Employee Directors to cease to be considered Disinterested Persons and, as a result, the provisions of Sections 20 and 21 shall be interpreted to be consistent with the foregoing intent.
Non-Employee Directors may not be granted options under the Plan other than pursuant to the provisions of Section 20 and 21. No Rights may be granted to Non-Employee Directors.
Exhibit 10(e)
THE ST. PAUL COMPANIES, INC.
BENEFIT EQUALIZATION PLAN
1995 REVISION
THE ST. PAUL COMPANIES, INC.
BENEFIT EQUALIZATION PLAN
1995 REVISION
Table of Contents
Page
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ARTICLE I GENERAL DESCRIPTION 1
Sec. 1.1 Name 1
Sec. 1.2 Plan Type 1
Sec. 1.3 Plan Background 1
Sec. 1.4 1995 Restatement 1
Sec. 1.5 Participating Employers 2
Sec. 1.6 Effective 2
ARTICLE II MISCELLANEOUS DEFINITIONS 3
Sec. 2.1 Administrator 3
Sec. 2.2 Code 3
Sec. 2.3 Change in Control 3
Sec. 2.4 Company 3
Sec. 2.5 Effective Date 3
Sec. 2.6 ERISA 3
Sec. 2.7 ERP Compensation 3
Sec. 2.8 Excess Deferrals 4
Sec. 2.9 Excess Deferral Account 4
Sec. 2.10 Excess Matching Contribution Account 4
Sec. 2.11 Excess Matching Contributions 4
Sec. 2.12 Executive Retirement Plan 4
Sec. 2.13 Executive Savings Plus 4
Sec. 2.14 Highly Compensated Employee 5
Sec. 2.15 Participant 5
Sec. 2.16 Participating Employer 5
Sec. 2.17 Plan 5
Sec. 2.18 Preferred Stock Fund 5
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Sec. 2.19 Retirement Plan 5
Sec. 2.20 Savings Plus Plan 5
Sec. 2.21 Termination of Employment 5
Sec. 2.22 Trust 5
Sec. 2.23 Trustee 5
ARTICLE III EXECUTIVE RETIREMENT PLAN BENEFITS 6
Sec. 3.1 Executive Retirement Plan Contributions 6
Sec. 3.2 Normal Retirement Benefit 6
Sec. 3.3 Early Retirement Benefit 7
Sec. 3.4 Deferred Vested Retirement Benefit 9
Sec. 3.5 Charge for Preretirement Survivor Protection 9
Sec. 3.6 Grandfathered Benefit Formulas Under
Predecessor Plans 9
ARTICLE IV DISTRIBUTION OF EXECUTIVE RETIREMENT PLAN BENEFITS 10
Sec. 4.1 Distribution of Benefits to Participant 10
Sec. 4.2 Death Benefits 10
Sec. 4.3 Imputed Interest 11
Sec. 4.4 Actuarially Equivalent Present Value 11
Sec. 4.5 Benefit Commencement Date 11
Sec. 4.6 Payment Date for Installment Payments 11
Sec. 4.7 Computation of Installment Payments 11
Sec. 4.8 Beneficiary Designation 11
ARTICLE V EXECUTIVE SAVINGS PLUS PLAN BENEFITS 13
Sec. 5.1 Contributions 13
Sec. 5.2 Participant Accounts 13
Sec. 5.3 Imputed Earnings 13
Sec. 5.4 Investment of Trust Fund 13
Sec. 5.5 Vesting 13
Sec. 5.6 Economy Supplemental Contributions 13
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ARTICLE VI DISTRIBUTION OF EXECUTIVE SAVINGS PLUS BENEFITS 14
Sec. 6.1 Distribution of Benefits 14
Sec. 6.2 Death Benefits 14
Sec. 6.3 Beneficiary Designation 14
ARTICLE VII ADMINISTRATION OF THE PLAN 15
Sec. 7.1 Administrator 15
Sec. 7.2 Amendment and Termination 15
Sec. 7.3 No Employment Rights Created 15
Sec. 7.4 Payments 15
Sec. 7.5 Non-assignability of Benefits 15
Sec. 7.6 Status of Plan 15
Sec. 7.7 Applicable Law 16
Sec. 7.8 Number and Gender 16
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THE ST. PAUL COMPANIES, INC.
BENEFIT EQUALIZATION PLAN
1995 REVISION
|
ARTICLE I
GENERAL DESCRIPTION
Sec. 1.1 Name. The name of the plan set forth herein is "The St. Paul Companies, Inc. Benefit Equalization Plan." It is sometimes referred to herein as the "Plan." The Plan is comprised of two parts:
(a) The "Executive Retirement Plan" or "ERP," which supplements the benefits provided under the Retirement Plan.
(b) "Executive Savings Plus" or "ESP," which supplements the benefits provided under the Savings Plus Plan and the Preferred Stock Fund.
Sec. 1.2 Plan Type. The Plan is intended to be (and will be construed and administered as) an unfunded employee pension benefit plan. The Plan is maintained by the Participating Employers primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. The Plan is intended to be exempt from the provisions of Parts 2 through 4 of Title I and from Title IV of ERISA by operation of sections 201(2), 302(a)(3), 401(a)(1) and 4021(b)(6) thereof. The Plan is not intended to qualify under Code section 401(a).
Sec. 1.3 Plan Background. Effective as of January 1, 1976, the Company established The St. Paul Companies, Inc. Excess Benefit Plan for the purpose of providing supplemental benefits to participants in the Retirement Plan and The St. Paul Companies, Inc. Profit Sharing Plan whose benefits under those plans were limited by operation of Code section 415. The Plan was amended and restated effective January 1, 1987 to take into account new limitations on the benefits which could be provided under the Retirement Plan and the Savings Plus Plan (which is the successor to the Profit Sharing Plan). In conjunction with this amendment, the name of the Plan was changed to "The St. Paul Companies, Inc. Benefit Equalization Plan" and a Trust was established for the purpose of holding contributions made pursuant to the terms of the Plan.
Sec. 1.4 1995 Restatement. The Plan is being amended and restated effective January 1, 1995, to deal with the following issues:
(a) A new benefit formula was adopted under the Retirement Plan effective January 1, 1989 in response to new requirements imposed by legislation.
(b) The Preferred Stock Fund was established in 1990 to provide matching contributions with respect to participant contributions under the Savings Plus Plan. The ESP provides certain supplemental benefits in cases where the Preferred Stock Fund benefits are limited by the Code.
(c) Certain benefits that the Participating Employers wish to provide to Participants who were employees of acquired subsidiaries cannot be fully paid by the Retirement Plan, Savings Plus Plan, or Preferred Stock Fund because of limitations imposed by the Code, necessitating that a portion of the benefits be provided by this Plan.
(d) Certain enhanced early retirement benefits must be paid by this Plan due to Code-imposed limits on the benefits which can be provided under the Retirement Plan.
(e) Certain changes are being made with regard to the timing of benefit payments under this Plan.
Sec. 1.5 Participating Employers. This Plan applies to each employer participating in the Retirement Plan or the Savings Plus Plan or both such plans, as the case may be.
Sec. 1.6 Effective Date. Except as specifically provided herein, the 1995 Revision of the Plan is applicable in determining all benefits payable on or after January 1, 1995.
ARTICLE II
MISCELLANEOUS DEFINITIONS
The following terms, when used in the Plan have the meanings set forth in this Article:
Sec. 2.1 Administrator. "Administrator" means the Company or the person or committee appointed by the Company in accordance with the provisions of Section 7.1, as the context requires.
Sec. 2.2 Code. "Code" means the Internal Revenue Code of 1986, as amended from time to time.
Sec. 2.3 Change In Control. "Change in Control" of the
Company shall mean a change in control of a nature that would be
required to be reported (assuming such event has not been
"previously reported") in response to Item l (a) of the Current
Report on Form 8-K, as in effect on December 1, 1987 pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
"1934 Act"); provided that without limitation, such a Change in
Control shall be deemed to have occurred at such time as (i) any
"person" (within the meaning of Section 14(d) of the 1934 Act,
other than the Company or any employee benefit plan(s) sponsored
by the Company or a subsidiary) is or becomes the "beneficial
owner" (as defined in Rule l3d-3 under the 1934 Act), directly or
indirectly, of 50% or more of the combined voting power of the
Company's outstanding securities ordinarily having the right to
vote at elections of directors; or (ii) individuals who
constitute the Board of Directors of the Company on December 1,
1987 cease for any reason to constitute at least a majority
thereof; provided that any person becoming a director subsequent
to December 1, 1987 whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least
three quarters of the directors comprising the Board of Directors
of the Company on December 1, 1987 (either by a specific vote or
by approval of the proxy statement of the Company is named as a
nominee for director, without objection to such nomination) shall
be, for purposes of this clause (ii), considered as though such
person were a member of the Board of Directors of the Company on
December 1, 1987.
Sec. 2.4 Company. "Company" means The St. Paul Companies, Inc. or any successor thereto.
Sec. 2.5 Effective Date. The "Effective Date" of the Plan is January 1, 1976, the date as of which the Plan was established.
Sec. 2.6 ERISA. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time.
Sec. 2.7 ERP Compensation. "ERP Compensation" with
respect to a Participant for a calendar year means the
Participant's compensation for the calendar year within the
meaning of the Retirement Plan but disregarding the limit under
Code section 401(a)(17), increased by the amount of the
Participant's compensation reductions under this Plan for that
year and by the amount of any deferred bonus under an annual
bonus plan (whether deferral is elective or mandatory) that, but
for the deferral, would have been payable to the Participant
during that year; and decreased by the amount of any deferred
bonus that becomes vested solely by reason of the Participant's
death, disability or termination of employment or by reason of
change in control of the Company. However, ERP Compensation
does not include long-term incentive bonuses, regardless of when
paid. The Administrator, in its sole discretion, may adopt
rules, uniformly applied among similarly situated Participants,
for purposes of including within the definition of ERP
Compensation for any calendar year, the amount of base salary or
compensation that, but for the Participants election to defer
the receipt of such amount, would have been payable to the
Participant during the calendar year in question.
Notwithstanding the foregoing, to the extent included when paid
in the computation of a Participant's final average compensation
for purposes of the Retirement Plan, the amount of any deferred
bonus or deferred salary or compensation, if applicable,
(whether deferral is elective or mandatory) will not be taken
into account as ERP Compensation. ERP Compensation includes
Excess Deferrals under this Plan.
Sec. 2.8 Excess Deferrals "Excess Deferrals" with respect to a Participant for a calendar year means the amount that would have been contributed as pre-tax contributions to his account under the Savings Plus Plan for the calendar year pursuant to his compensation reduction election thereunder if the limitations of Code sections 401(a)(17), 401(m), 402(g) and 415 were disregarded, minus the amount of pre-tax contributions actually made to his account under the Savings Plus Plan for the calendar year.
Sec. 2.9 Excess Deferral Account, "Excess Deferral Account" with respect to a Participant means the account established on his behalf pursuant to Sec. 5.2(a).
Sec. 2.10 Excess Matching Contribution Account. "Excess Matching Contribution Account" with respect to a Participant means the account established on his behalf pursuant to Sec. 5.2(b).
Sec. 2.11 Excess Matching Contributions. "Excess Matching Contributions" with respect to a Participant for a calendar year means the amount of matching contributions that would have been made to his account under the Preferred Stock Fund or Savings Plus Plan for the calendar year if the limitations of Code sections 401(a)(17), 401(m), 402(g) and 415 were disregarded, minus the amount of matching contributions actually made to his account under said Plans for the calendar year.
Sec. 2.12 Executive Retirement Plan. "Executive Retirement Plan" or "ERP" means the portion of the Plan which supplements benefits under the Retirement Plan.
Sec. 2.13 Executive Saving Plus. "Executive Savings Plus" or "ESP" means the portion of the Plan which supplements benefits under the Savings Plus Plan and the Preferred Stock Fund.
Sec. 2.14 Highly Compensated Employee. A person is a "Highly Compensated Employee for purposes of ERP or ESP if he is a highly compensated employee (as defined in Code section 414(q)) with respect to the particular Plan.
Sec. 2.15 Participant. "Participant" for purposes of the ERP means any individual who is (1) a participant in the Retirement Plan, (2) a Highly Compensated Employee and (3) entitled to a benefit pursuant to the ERP which has not yet been paid in full. "Participant" for purposes of the ESP means any individual who is (1) a participant in the Savings Plus Plan, (2) a Highly Compensated Employee, and (3) entitled to a benefit pursuant to the ESP which has not yet been paid in full.
Sec. 2.16 Participating Employer. "Participating Employer" means the Company and each other employer which participates in the Retirement Plan, the Savings Plus Plan, or the Preferred Stock Fund.
Sec. 2.17 Plan. "Plan" means The St. Paul Companies, Inc. Benefit Equalization Plan, as from time to time amended or restated.
Sec. 2.18 Preferred Stock Fund. "Preferred Stock Fund" means The St. Paul Companies, Inc. Savings Plus Preferred Stock Ownership Plan as in effect from time to time.
Sec. 2.19 Retirement Plan. "Retirement Plan" means The St. Paul Companies, Inc. Employees' Retirement Plan as in effect from time to time.
Sec. 2.20 Savings Plus Plan. "Savings Plus Plan" means The St. Paul Companies, Inc. Savings Plus Plan as in effect from time to time.
Sec. 2.21 Termination of Employment. The "Termination of Employment" of an employee for purposes of the Plan shall be deemed to occur upon his resignation, discharge, retirement, death or the authorized extension or extensions thereof, failure to return to work when duly called following a temporary layoff, or upon the happening of any other event or circumstance which, under the policy of his Participating Employer, as in effect from time to time, results in the termination of the employer-employee relationship; provided, however, that a Termination of Employment shall not be deemed to occur upon a transfer between any combination of Participating Employers.
Sec. 2.22 Trust. "Trust" means The St. Paul Companies, Inc. Benefit Equalization Plan Trust implemented to provide benefits under the Plan.
Sec. 2.23 Trustee. "Trustee" means the one or more individuals, banks or trust companies who at the relevant time has or have been appointed by the Company to act as Trustee of the Trust.
ARTICLE III
EXECUTIVE RETIREMENT PLAN BENEFITS
Sec. 3.1 Executive Retirement Plan Contributions. The
Participating Employers
may contribute amounts to the Trust for the purpose of providing
all or a portion of the benefits to which Participants are
entitled under the ERP. The amount of such contributions, if
any, will be determined by the Company.
Sec. 3.2 Normal Retirement Benefit.
(a) Regular Benefit. Upon the normal retirement of a Participant, as determined under the Retirement Plan, the Participant shall be entitled to a benefit under this Plan in an amount equal to his pension determined in accordance with the provisions of the Retirement Plan, subject to the following:
(1) The benefit will be based on his ERP Compensation.
(2) The benefit will be determined without regard to the limitations of Code section 415.
(3) The benefit will be determined without regard to any limitations on grandfathered benefit formulas under predecessor plans, as referred to in Sec. 3.6.
(4) The benefit will be reduced by the actual amount of the benefit to which he or, in the event of his death, his spouse or other beneficiary or annuitant is entitled under the Retirement Plan, in both cases determined with respect to the actual form in which benefits are paid under the Retirement Plan.
(b) Retirement Plan Formula Change Benefit (Retirement Eligibility on January 1, 1989). A Participant described in (a) is also entitled to a Retirement Plan formula change benefit pursuant to this subsection (b) if he is a "Highly Compensated Employee" and he was eligible as of January 1, 1989 to terminate employment and immediately commence receiving a monthly retirement benefit under the Retirement Plan. The Retirement Plan formula change benefit shall be the amount in (1), less the amount in (2), with each such amount to be determined in the actual form in which benefits are paid under the Retirement Plan:
(1) An amount equal to the amount of benefit to which the Participant would have been entitled under the Retirement Plan if the Retirement Plan benefit formula in effect on December 31, 1988 had remained in effect until the date of the Participant's Termination of Employment, less
(2) The actual amount of benefit to which the Participant is entitled under the Retirement Plan and under subsection (a).
(c) Retirement Plan Formula Change Benefit (Non Retirement Eligible on January 1. 1989). A Participant described in (a) is also entitled to a Retirement Plan formula change benefit pursuant to this subsection (c) if his ERP Compensation during 1988 is at least $170,000 and he is not eligible for a benefit under subsection (b). The Retirement Plan formula change benefit shall be the amount in (1), less the amount in (2), with each such amount to be determined in the actual form in which benefits are paid under the Retirement Plan:
(1) An amount equal to the amount of benefit to which the Participant would have been entitled under the Retirement Plan if the Retirement Plan benefit formula in effect on December 31, 1988 had remained in effect until the date of the Participant's termination of employment but
(i) the formula was modified to substitute 55% for 60% as the guaranteed percentage and,
(ii) the benefit was not reduced by the Participant's primary social security old age survivor benefit, less
(2) The actual amount of benefit to which the Participant is entitled under the Retirement Plan and under subsection (a).
Sec. 3.3 Early Retirement Benefit.
(a) Regular Benefit. Upon die early retirement of a Participant, as determined under the Retirement Plan, the Participant shall be entitled to a benefit under this Plan in an amount equal to his pension determined in accordance with the provisions of the Retirement Plan, subject to the following:
(1) The benefit will be based on his ERP Compensation.
(2) The benefit will be determined without regard to the limitations of code section 415.
(3) The benefit will be determined without regard to any limitations on grandfathered benefit formulas under predecessor plans, as referred to in Sec. 3.6.
(4) The benefit will be determined without regard to any limitations with respect to participation in special early retirement benefits by Highly Compensated Employees.
(5) The benefit will be reduced by the actual amount of the benefit to which he or, in the event of his death, his spouse or other beneficiary or annuitant is entitled under the Retirement Plan, in both cases determined with respect to the actual form in which benefits are paid under the Retirement Plan.
(6) Said amounts will be determined with respect to the actual form in which benefits are paid under the Retirement Plan and with the same early commencement reduction factors, if applicable, that are applied under the Retirement Plan.
(b) Retirement Plan Formula Change Benefit (Retirement
Eligibility on January 1, 1989). A Participant described in
(a) is also entitled to a Retirement Plan formula change
benefit pursuant to this subsection (b) if he is a "Highly
Compensated Employee" and he was eligible as of January 1,
1989 to terminate employment and immediately commence
receiving a monthly retirement benefit under the Retirement
Plan. The Retirement Plan formula change benefit shall be
the amount in (1), less the amount in (2), with each such
amount to be determined in the actual form in which benefits
are paid under the Retirement Plan:
(1) An amount equal to the amount of benefit to which the Participant would have been entitled under the Retirement Plan if the Retirement Plan benefit formula in effect on December 31, 1988 had remained in effect until the date of the Participants Termination of Employment, less
(2) The actual amount of benefit to which the Participant is entitled under the Retirement Plan and under subsection (a).
The same early commencement reduction factors, if applicable, that are applied under the Retirement Plan shall be applied to the benefit otherwise determined under this subsection.
(c) Retirement Plan Formula Change Benefit (Not Retirement Eligible on January 1,1989). A Participant described in (a) is also entitled to a Retirement Plan formula change benefit pursuant to this subsection (c) if his ERP Compensation during 1988 is at least $170,000 and he is not eligible for a benefit under subsection (b). The Retirement Plan formula change benefit shall be the amount in (1), less the amount in (2), with each such amount to be determined in the actual form in which benefits are paid under the Retirement Plan:
(1) An amount equal to the amount of benefit to which the Participant would have been entitled under the Retirement Plan if the Retirement Plan benefit formula in effect on December 31, 1988 had remained in effect until the date of the Participants termination of employment but
(i) the formula was modified to substitute 55% for 60% as the guaranteed percentage and,
(ii) the benefit was not reduced by the Participants primary social security old age survivor benefit, less
(2) The actual amount of benefit to which the Participant is entitled under the Retirement Plan and under subsection (a).
The same early commencement reduction factors, if applicable, that are applied under the Retirement Plan shall be applied to the benefit otherwise determined under this subsection.
Sec. 3.4 Deferred Vested Retirement Benefit. If a Participant terminates employment with the Employer and is entitled to a deferred vested retirement benefit, as determined under the Retirement Plan, the Participant shall be entitled to a benefit under this Plan in an amount equal to his deferred vested retirement benefit determined in accordance with the provisions of the Retirement Plan, but based on his ERP Compensation and without regard to the limitations of section 415 of the Code, less the actual amount of the benefit to which he or, in the
event of his death, his spouse or other beneficiary or annuitant is entitled under the Retirement Plan, in both cases determined with respect to the actual form in which benefits are paid under the Retirement Plan and with the same early commencement reduction factors, if applicable, that are applied under the Retirement Plan being applied to the benefit otherwise determined under this section.
Sec. 3.5 Charge for Preretirement Survivor Protection. If the amount of the Participant's benefit under the Retirement Plan is reduced to reflect the cost of qualified preretirement survivor annuity protection for the Participant's surviving spouse, the amount of the Participant's benefit under this Article shall be reduced by applying to the benefit otherwise determined under this Article the reduction factor applied under the Retirement Plan.
Sec. 3.6 Grandfathered Benefit Formulas Under Predecessor Plans. Exhibit A of the Retirement Plan provides that benefit accruals for certain Participants under the Retirement Plan will not be less than the amounts which would have been accrued under certain predecessor plans. Such enhanced accruals generally are not available to persons who are considered Highly Compensated Employees. If a Participant in this Plan would be eligible for such enhanced accruals under Exhibit A but for his status as a Highly Compensated Employee, the ERP will provide the additional amounts which would have been provided under the Retirement Plan but for said limitations.
ARTICLE IV
DISTRIBUTION OF EXECUTIVE RETIREMENT PLAN BENEFITS
Sec. 4.1 Distribution of Benefits to Participants.
(a) Present Value $50,000 Or Less. If the lump sum Actuarially Equivalent Present Value of the Participant's ERP benefit is $50,000 or less as of his Benefit Commencement Date, said benefit will be paid to him in a single sum as soon as practicable after his Benefit Commencement Date.
(b) Present Value Over $50,000. If the lump sum Actuarially Equivalent Present Value of the Participant's ERP benefit is over $50,000 as of his Benefit Commencement Date, said amount will be paid to him in annual installments over a ten year period beginning on his Benefit Commencement Date.
Sec. 4.2 Death Benefits.
(a) Death Prior to Benefit Commencement. If a Participant dies prior to payment of any benefits to him under Sec. 4.1, he is survived by a spouse to whom he was married on the date of his death, and the spouse is entitled to a surviving spouse benefit under the Retirement Plan, the spouse will also be entitled to a benefit under the ERP, subject to the following:
(1) The ERP benefit will be paid in a single sum promptly after the date the spouse's surviving spouse benefit commences under the Retirement Plan.
(2) If, at the time of his death, the Participant had 50% surviving spouse protection in effect under the Retirement Plan, the ERP surviving spouse benefit will be 50% of the lump sum Actuarially Equivalent Present Value of the Participant's ERP benefit accrued through the date of his death. If the Participant had 100% surviving spouse protection in effect under the Retirement Plan at the time of his death, the ERP surviving spouse benefit will be 100% of the lump sum Actuarially Equivalent Present Value of the Participant's ERP benefit accrued through the date of his death.
(3) If the requirements of (A), (B), or (C) are met, no death benefits will be paid under the ERP:
(A) The Participant dies without a surviving spouse.
(B) The Participant dies before attaining age 62, and at the time of his death he had not yet completed five years of Vesting Service (as defined in the Retirement Plan).
(C) The Participant's spouse dies before the date on which the Participant would have attained age 55 had he lived.
(4) Death benefits payable under this subsection (a) will be paid to the Participant's surviving spouse. No other beneficiary may be designated.
(b) Death After Benefit Commencement. If a Participant who
is entitled to an ERP benefit dies after distribution
of such benefit has commenced in the form described in
Section 4.1(b), the undistributed balance will be
distributed to the Participant's Beneficiary in a
single sum promptly after the Participant's death.
Sec. 4.3 Imputed Interest. "Imputed Interest" with regard to installment payments under the ERP shall be credited on the last day of each calendar year at a rate equal to the average of the prime rate of interest in effect at First Bank National Association in St. Paul, Minnesota as of the last business day of each month of the calendar year.
Sec. 4.4 Actuarial Equivalent Present Value. The "Actuarially Equivalent Present Value" of a benefit under the ERP will be determined as of the Participants Benefit Commencement Date and will be determined using the conversion factors that would be applied to a similar benefit under the Retirement Plan on the same date.
Sec. 4.5 Benefit Commencement Date. The "Benefit Commencement Date" for purposes of the ERP is the earliest date on or after the Participants Termination of Employment on which he is eligible to begin receiving an immediate benefit under the Retirement Plan, regardless of whether he actually elects to begin receiving Retirement Plan benefits at that time.
Sec. 4.6 Payment Date for Installment Payments. The Administrator may, by uniform rule, specify one or more dates during a calendar year on which that year's installments will be made.
Sec. 4.7 Computation of Installment Payments. If benefits are paid in the form of installments, the amount of each installment shall be determined as follows:
(a) The first installment is the Actuarially Equivalent Present Value of the benefit divided by the number of installments.
(b) Each installment after the first installment is
(1) The value of the remaining benefit (including Imputed Interest) immediately after the last installment was paid, plus any Imputed Interest credited after payment of the last installment, divided by
(2) The number of remaining installments' including the current installment
Sec. 4.8 Beneficiary Designation.
(a) Designation or Determination of Beneficiary. Unless a Participant otherwise designates, in the manner prescribed by the Administrator, in the event of the Participants death, any death benefits payable under Sec. 4.2(b) shall be paid to the Participant's surviving spouse. If, upon the death of the Participant, no beneficiary designation has been filed with the Administrator or if the designated beneficiaries have predeceased the Participant, the Participant shall be deemed to have designated as his beneficiary the first of the following categories that is applicable in his case:
(1) the Participants surviving spouse; or, if none,
(2) the Participants natural born or legally adopted children, per stirpes, or, if none,
(3) the Participant's estate.
Subject to the foregoing, any designation of a beneficiary or beneficiaries under this section may be changed from time to time by written notice to the Administrator in such form as the Administrator may prescribe. Any such designation shall be effective only if it is received by the Administrator prior to the Participants death.
(b) Changes. Notwithstanding any provision of the Retirement Plan to the contrary, a Participant may designate any beneficiary or beneficiaries under the Plan and may revoke any previous designations, without the consent of the Participant's spouse.
ARTICLE V
EXECUTIVE SAVINGS PLUS BENEFITS
Sec. 5.1 Contributions. For each calendar year, each Employer shall contribute to the Trust, on behalf of each Participant in its employ whose compensation has been reduced by the amount of his Excess Deferrals, the total of such Participants Excess Deferrals and Excess Matching Contributions. Such contributions shall be made on such date or dates during or following such calendar year as the Company shall from time to time specify.
Sec. 5.2 Participant Accounts. The Administrator shall maintain the following Accounts for each Participant:
(a) An "Excess Deferral Account," to which Excess Deferrals shall be credited.
(b) An "Excess Matching Contribution Account," to which Excess Matching Contributions shall be credited.
(c) An "Economy Supplemental Account", for amounts credited under Sec. 5.6.
Sec. 5.3 Imputed Earnings. On the same dates on which earnings, losses, and income are credited to participants' accounts under the Savings Plus Plan, the Participant's Accounts under this Plan shall be adjusted to reflect the adjustments which would have occurred if the amounts credited to those Accounts had been contributed to the Savings Plus Plan and had been invested in the same manner as his corresponding accounts under the Savings Plus Plan are then invested. Any Excess Matching Contributions which are in lieu of contributions to the Preferred Stock Fund will similarly be adjusted to reflect changes in the value of accounts under said Plan. If a Participant ceases to have funds invested under the Savings Plus Plan, his investment directions last in effect under said Plan will remain in effect for purposes of this Plan until such time as the Participant gives different directions to the Administrator.
Sec. 5.4 Investment of Trust Fund. The Trust Fund shall be invested by the Trustee, in the manner directed by the Company. Benefits under the Plan will be calculated as provided in Sec. 5.3, and are not dependent on the investment returns on the amounts held by the Trustee.
Sec. 5.5 Vesting. Each Participant shall at all times be fully vested in his Excess Deferral Account. Each Participant shall be vested in his Excess Matching Contribution Account and Economy Supplemental Account to the same extent that he is vested in the comparable account under the Savings Plus Plan or Preferred Stock Fund, whichever is applicable.
Sec. 5.6 Economy Supplemental Contributions. The Savings Plus Plan provides supplemental contributions for certain Economy employees. If the amount allocated to such an employee under said Plan is limited due to the annual limit on compensation under Code section 401(a)(17), or due to any other applicable limit imposed by the Code, the amount by which the supplemental contribution must be reduced shall be credited to the employee's Economy Supplemental Account under this Plan.
ARTICLE VI
DISTRIBUTION OF EXECUTIVE SAVINGS PLUS BENEFITS
Sec. 6.1 Distribution of Benefits.
(a) Benefits $50,000 Or Less. If a Participants vested Executive Savings Plus benefit is $50,000 or less as of the valuation date coincident with or next following his Termination of Employment, said benefit will be paid to him in a single sum promptly after his Termination of Employment.
(b) Benefits Over $50,000. If a Participant's vested Executive Savings Plus benefit is over $50,000 as of the valuation date coincident with or next following his Termination of Employment, said benefit will be paid to him in ten annual installments. The flat installment will be paid promptly after his Termination of Employment and the remaining installments will be paid in succeeding years thereafter. Each annual installment payment shall be in an amount equal to the vested account balance as of the valuation date coinciding with or last preceding the payment in question, multiplied by a fraction, the numerator of which is one and the denominator of which is the number of remaining annual installment payments, including the payment for which the determination is being made.
Sec. 6.2 Death Benefits. Any undistributed vested Exeutive Savings Plus benefit remaining at the time of a Participant's death shall be distributed to the Participant's designated beneficiary in a lump sum payment as soon as administratively practicable following the Administrator's receipt of notice of the Participant's death.
Sec. 6.3 Beneficiary Designation.
(a) Designation or Determination of Beneficiary. Unless a Participant otherwise designates, in the manner prescribed by the Administrator, the beneficiary or beneficiaries to whom the undistributed balance of the Participant's Excess Deferral Account and Excess Matching Contribution Account shall be paid in the event of his death shall be the same as the Participant has designated or, in the absence of a valid designation hereunder, as is otherwise applicable with respect to the Participant, under the Savings Plus Plan. The Administrator's good faith distribution based on his actual knowledge of the existence of a Participants beneficiaries shall be conclusive and binding on all beneficiaries of a Participant.
(b) Changes. Notwithstanding any provision of the Savings Plus Plan to the contrary, a Participant may designate any beneficiary or beneficiaries under ESP and may revoke any previous designations, without the consent of the Participant's spouse.
ARTICLE VII
ADMINISTRATION OF THE PLAN
Sec. 7.1 Administrator. The Plan shall be administered by the Company, which shall have the discretionary authority to construe, interpret, apply and enforce the Plan and issue such regulations as it deems appropriate in the exercise of such discretionary authority. The Administrator shall have the duty and responsibility of maintaining records, making the requisite calculations and disbursing or directing the Trustee to disburse payments under the Plan. The Administrators interpretations, determinations, regulations and calculations shall be final and binding on all persons and parties concerned. The Administrator may appoint a person or a committee to carry out those administrative duties under the Plan as are specified by the Administrator. Any such committee shall operate in accordance with such rules as the Administrator shall provide at the time of the committee's formation or thereafter.
Sec. 7.2 Amendment and Termination. The Administrator may amend or terminate the Plan at any time; provided, that, no such amendment or termination shall reduce a benefit to which a Participant or the beneficiary or annuitant of a deceased Participant is entitled under the Plan prior to the date of such amendment or termination unless such Participant or beneficiary or becomes entitled to an amount equal to such benefit under another plan or practice adopted by the Company. Any amendment to the Plan shall apply only to Participants who terminate employment after the effective date of the amendment unless the amendment expressly otherwise provides. Notwithstanding the foregoing provision, to the extent necessary to ensure the continued status of the Plan as an unfunded plan maintained for a select group of management or highly compensated employees based on final regulations or advisory opinions of the Department of Labor, the Administrator may amend the Plan to cause the cessation of future benefit accruals of any Participant and may cause the Trustee to make an immediate lump sum distribution to any such Participant of his accrued benefit under the Plan at any time on or after the effective date of such amendment.
Sec. 7.3 No Employment Rights Created. The establishment of the Plan shall neither give any Employee a right to continuing employment nor limit the right of the Employer to discharge any person or otherwise deal with the Employee without regard to the effect such action might have upon him or her as a Participant.
Sec. 7.4 Payments. The Company, through the Trust and, to the extent not so paid, from its general assets, will pay all benefits arising under this Plan and all costs, charges and expenses relating thereto.
Sec. 7.5 Non-Assignability of Benefits. The benefits payable under the Plan and the right to receive future benefits under the Plan may not be anticipated, alienated, sold, transferred, assigned, pledged, encumbered, or subjected to any charge or legal process.
Sec. 7.6 Status of Plan. Nothing contained herein shall be construed as providing for assets to be held for the Participant or for any other person or persons to whom benefits are to be paid pursuant to the terms of this Plan, the Participant's only interest hereunder being the right to receive the benefits set forth herein. The Trust is established only for the convenience of the Company and the Participants, and no Participant shall have any interest in the assets of the Trust prior to their distribution pursuant to the Plan. To the extent the Participant or any other person acquires a right to receive benefits under this Plan or the Trust, such right shall be no greater than the right of any unsecured general creditor of the Company.
Sec. 7.7 Applicable Law. All questions pertaining to the construction, validity, effect and enforcement of the Plan shall be determined in accordance with the laws of the United States and to the extent not preempted by such laws, by the internal, substantive laws of the State of Minnesota without regard to the conflict of law rules of the State of Minnesota or of any other jurisdiction.
Sec. 7.8 Number and Gender. Wherever appropriate in the Plan, the singular number may be read as the plural, the plural may be read as the singular, and the masculine gender may be read as the feminine gender.
IN WITNESS WHEREOF, the Company has caused this instrument to be signed by its duly authorized officers and has caused its corporate seal to be hereto affixed as of the 8th day of May, 1995.
(CORPORATE SEAL) THE ST.PAUL COMPANIES, INC.
By: /s/ Greg A. Lee
------------------
Greg A. Lee
|
Title: Sr. Vice President-Human Resources
By: /s/ Bruce A. Backberg
----------------------
Bruce A. Backberg
Title: Vice President and
Corporate Secretary
|
Exhibit 10(f)
FIRST AMENDMENT TO
THE ST. PAUL COMPANIES, INC.
BENEFIT EQUALIZATION PLAN
1995 REVISION
The St. Paul Companies, Inc. Benefit Equalization Plan 1995 Revision (the "Plan") is hereby amended effective January 1, 1998 except as otherwise provided, as follows:
I.
Section 2.8 of the Plan is hereby amended to read as follows:
Sec. 2.8 Excess Deferrals. "Excess Deferrals"
for a calendar year with respect to a person who
satisfies the eligibility conditions set forth in
Section 2. 15(b)(1) through (3) for such calendar year
means the amount that would have been contributed as
pre-tax contributions to his account under the Savings
Plus Plan for the calendar year pursuant to his
irrevocable compensation reduction election under the
Savings Plus Plan if the limitations under Code
Sections 401(a)(17), 402(g) and 415 were disregarded,
minus the amount of pre-tax contributions actually made
to his account under the Savings Plus Plan for the
calendar year. A person who does not satisfy all of
the eligibility requirements of Section 2.15(b)(1)
through (3) of the Plan for a calendar year shall not
have any Excess Deferrals credited to his Excess
Deferral Account for such calendar year.
II.
Section 2.11 of the Plan is hereby amended to read as follows:
Sec. 2.11 Excess Matching Contributions. "Excess
Matching Contributions" for a calendar year with respect to
a person who satisfies the eligibility conditions set forth
in Section 2.15(b)(1) through (3) for such calendar year
means the amount of matching contributions that would have
been contributed to his account under the Preferred Stock
Fund for the calendar year if the limitations under Code
Sections 401(a)(17), 401(m), 402(g) and 415 were
disregarded, minus the amount of matching contributions
actually made to his account under the Preferred Stock Fund
for the calendar year. A person who does not satisfy all of
the eligibility requirements of Section 2.15(b)(1) through
(3) of the Plan for a calendar year shall not have any
Excess (including a deemed election pursuant to the
preceding sentence) shall remain in effect until the
Participant files a change in investment election with the
Administrator.
The Administrator shall designate two or more Investment Funds for Participant investment elections under this Section 4.3. Except for the Company Stock Fund and the Prime Fund (as each are described below) each Investment Fund shall be a registered investment company (mutual fund). The Administrator may make a "Company Stock Fund" available as an Investment Fund under the Plan. If the Administrator makes a Company Stock Fund available under this Section 4.3, amounts deemed invested in the Company Stock Fund shall be credited or charged with income, gains and losses as if such amounts were contributed to the Savings Plus Plan and invested in the St. Paul Companies, Inc. Common Stock Fund offered under the Savings Plus Plan. In addition, the Plan shall make available an "Prime Fund" under which the portion of the Participant's ERP Account will be credited with interest during each calendar quarter at the prime rate of interest reported in the Wall Street Journal as of the last business day of the preceding calendar quarter.
The Administrator, in his sole discretion, may
prospectively designate additional Investment Funds, replace
Investment Funds or eliminate Investment Funds from time to
time; provided that (i) there must be at least two
Investment Funds available under the Plan at all times, and
(ii) the Administrator may not eliminate the Prime Fund,
except that the Administrator may prospectively change the
manner in which interest is credited under the Interest Fund
(including, but not limited to, changes in the manner in
which the interest rate is determined, the frequency at
which the rate is redetermined, and/or the compounding
periods).
If the Administrator eliminates or replaces an Investment Fund (an "Eliminated Fund"), each Participant must file a change in investment election to redirect the investment of amounts which were deemed to be invested in the Eliminated Fund. This change in investment election must be filed prior to the first day on which the Eliminated Fund ceases to be an Investment Fund (the "Elimination Date"). If a Participant does not file a change in investment election before the Elimination Date, the amounts that were deemed to be invested in the Eliminated Fund immediately prior to the Elimination Date will be deemed to be invested in such Investment Fund (or among such Investment Funds) as the Plan Administrator, in his sole Matching Contributions credited to his Excess Matching Contribution Account for such calendar year.
III.
Section 2.15 of the Plan is hereby amended to read as follows:
Sec. 2.15 Participant. "Participant" means:
(a) For purposes of the ERP, any individual who
(1) is a participant in the Retirement Plan, (2)
is a Highly Compensated Employee and (3) is
entitled to a benefit pursuant to ERP which has
not yet been paid in full; and
(b) For purposes of ESP, any individual who for a calendar year (1) participates in the Savings Plus Plan, (2) is designated, or is a member of a class of employees of a Participating Employer designated, as eligible to participate in ESP from time to time by the Company's Sr. Vice President, Human Resources, and (3) makes an irrevocable compensation reduction election for such calendar year under the Savings Plus Plan and ESP before the first day of such calendar year (or, if later, within 30 days after such person was first hired by a Participating Employer). A person who has an Account balance under ESP shall remain an ESP Participant until the entire balance of his Account is distributed.
IV.
Section 2.21 is hereby amended by adding the following sentence to the end thereof:
Notwithstanding the foregoing, for purposes of processing distributions under the Executive Savings Plus, if a Participant's Termination of Employment is not reflected in the payroll report for any payroll period ending in the month in which such Termination of Employment occurred, the Participant's Termination of Employment shall be deemed to occur in the next following month.
V.
Section 4.1 of the Plan is hereby amended to read as follows:
(b) Present Value Over $50,000. If the lump sum Actuarial Equivalent Present Value of the Participant's ERP benefit exceeds $50,000 as of his Benefit Commencement Date, said amount shall be credited to the Participant's ERP Account as of the last day of the month that includes the Participant's Benefit Commencement Date. If the Participant's Benefit Commencement Date occurred prior to January 1, 1998 and as of January 1, 1998 the Participant's ERP benefit has not been distributed in full, the unpaid balance of the Participant's remaining ERP benefit (including imputed earnings credited through December 31, 1997) shall be credited to the Participant's ERP Account as of January 1, 1998. The Participant's ERP Account will be paid to the Participant in ten annual installments (including installments paid prior to January 1, 1998).
VI.
Section 4.3 is hereby amended to read as follows:
Sec. 4.3 Imputed Earnings. A Participant's ERP Account will be credited with investment income and gains and charged with investment losses and installment payments as if the Participant's Deferred Compensation Account was actually invested in accordance with the Participant's investment elections among the Investment Funds made available for Participant directed investment by the Administrator. A Participant may make or change his investment election in 1% increments. A change in investment election must be filed with the Administrator on a form prescribed by the Administrator or, if the Administrator establishes a telephonic voice response system for ERP Account investment elections, through such telephonic voice response system. A change in investment election will become effective as soon as practicable following the Administrator's receipt of the change in investment election.
If the Participant does not make an investment election with respect to his ERP Account (including ERP benefits which are in pay status as of January 1, 1998), he will be deemed to have elected to invest his entire ERP Account balance in the Prime Fund. A Participant's investment election discretion, shall designate until such time as the Participant files a valid change in investment election.
VII.
Section 4.6 is hereby amended to read as follows:
Sec. 4.6 Installment Payment Date. The "Installment Payment Date" with respect to an installment payment is the date as of which the amount of such installment payment is determined. The first installment payment date is the last day of the month that includes Benefit Commencement Date. The Installment Payment Date for subsequent annual installment payments shall be the last day of the calendar year (with respect to installments that commenced prior to January 1, 1998) and the last day of the month that includes the anniversary of the Benefit Commencement Date (with respect to installments commencing on or after January 1, 1998). Installment payments will be paid to the Participant within 30 days after the Installment Payment Date.
VIII.
Section 4.7 is hereby amended to read as follows:
Sec. 4.7 Computation of Installment Payments. If benefits are paid in the form of installments, the amount of each installment payment shall equal the Participant's ERP Account balance as of the Installment Payment Date divided by the number of remaining installment payments.
IX.
Section 5.6 is hereby amended effective January 1, 1997 to add the following sentence to the end thereof:
Notwithstanding the foregoing, no amounts will be credited under this Section 5.6 to a Participant's Economy Supplemental Account for any calendar year commencing on or after January 1, 1997.
X.
Section 6.1 is hereby amended to read as follows:
Sec. 6.1 Distribution of Benefits.
(a) Benefits $50,000 Or Less. If a Participant's vested Executive Savings Plus Account balance is $50,000 or less as of his Termination of Employment, the Participant's vested Account balance as of his Termination of Employment will be distributed in a single lump sum within 30 days after the last day of the month in which the Participant has a Termination of Employment.
(b) Benefits Over $50,000. If a Participant's vested Executive Savings Plus Account balance exceeds $50,000 as of the Participant's Termination of Employment, the Participant's vested Account balance will be paid to him in ten annual installments.
XI.
A new Section 6.4 is added to the end of Article VI to read as follows:
Sec. 6.4 Installment Payment Date. The "Installment Payment Date" with respect to an installment payment is the date as of which the amount of such installment payment is determined. The first installment payment date is the last day of the month in which the Participant has a Termination of Employment. The Installment Payment Date for subsequent annual installment payments shall be the last day of the calendar year (with respect to installments that commenced prior to January 1, 1998) and the last day of the month that includes the anniversary of the Participant's Termination of Employment (with respect to installments commencing on or after January 1, 1998). Installment payments will be paid to the Participant within 30 days after the Installment Payment Date.
XII.
A new Section 6.5 is hereby added to the Plan to read as follows:
Sec. 6.5 Computation of Installment Payments. If benefits are paid in the form of installments, the amount of each installment payment shall equal the Participant's vested ESP Account balance as of the Installment Payment Date divided by the number of remaining installment payments.
IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed by its duly authorized officers and its corporate seal to be hereunto affixed this day of , 1997.
THE ST. PAUL COMPANIES, INC.
(Corporate Seal)
By: /s/ Greg A. Lee
---------------
Greg A. Lee
Title: Senior Vice President-
Human Resources
|
Exhibit 10(g)
The St. Paul Companies, Inc. Executive Post-Retirement Life
Insurance Plan Summary Plan Description
Overview
The St. Paul's Executive Post-Retirement Life Plan
provides post-retirement life insurance coverage
for eligible executives who retire from the
Company and reach age 65. The objective of this
benefit is to help replace your basic life
insurance which decreases beginning at age 65.
Eligibility Coverage is available to key senior executives,
with participation determined by the chief
executive officer, The St. Paul Companies.
Coverage Coverage begins after you reach age 65 and have
retired under a qualified retirement program
sponsored by The St. Paul. The Employees'
Retirement Plan and Savings Plus are both
qualified retirement plans.
Benefit The executive post-retirement life insurance
benefit is equal to your annual base salary at
retirement, rounded to the next highest $1,000.
This benefit amount remains constant throughout
your retirement.
Cost The St. Paul pays the full cost of the post-
retirement life insurance benefit. Benefits are
payable out of the general assets of The St. Paul
or out of the Benefit Equalization Trust. The
company may purchase company-owned life insurance
to provide the trust with a source of funds for
the payment of your benefit.
Beneficiary The beneficiary is the same as the beneficiary you
designated for your basic life insurance. If you
have not designated a beneficiary for basic life
insurance, or you don't have a living beneficiary
on file at the time of your death, the benefit
will be paid to your survivors in the following
|
order:
- Your spouse
- Your children in equal shares
- Your parents in equal shares
- Your brothers and sisters in equal shares
- Your estate
Filing a claim Your beneficiary should contact Corporate
Compensation to apply for payment.
|
Payment method The benefit is paid as a cash lump sum. Payment
is made to your beneficiary as soon as
administratively feasible following your death.
Tax assistance The benefit is taxable income to your beneficiary.
The company will provide your beneficiary with a
tax assistance payment equal to a one-time gross-
up of the federal and Minnesota state income taxes
payable on the life insurance benefit.
The calculation will be made by applying the tax
rate schedules in effect for the amount of the
benefit (excluding the tax assistance amount) as
though it was the only source of income in the
year paid. In addition, the calculation will be
made without regard to any exclusions, exemptions
or deductions other than the federal income tax
deduction for Minnesota income taxes.
Employment A benefit is payable to your beneficiary if you retire
status under a St. Paul sponsored retirement plan and die at
changes age 65 or older. Taking early retirement under a
St. Paul sponsored retirement plan does not impact the
ability to obtain a benefit as long as you die at
age 65 or older.
No benefit is paid if you die before age 65 or if
you terminate employment before you are eligible
for retirement under a St. Paul sponsored
retirement plan.
If you become disabled, your employment with the
company continues. When your employment status
changes, the new status (i.e., retirement, death
or termination) will determine the impact on the
benefit.
Plan This summary applies to participants who
administration retire on or after January 1, 1991. The Company
has full and final authority to interpret the
terms of the plan and determines the eligibility
for the amount of benefits payable under the plan.
Although The St. Paul currently intends to
continue this plan indefinitely, it reserves the
right to change, amend or terminate the plan
(including any benefits payable under the plan) at
any time before your death. However, the company
may not amend the plan after you die to reduce the
amount of benefits payable to your beneficiary.
|
Exhibit 10(h)
The St. Paul Companies, Inc. Executive Long-Term Disability Plan Summary Plan Description
Overview
The St. Paul's Executive Long-Term
Disability Plan provides eligible
participants with long-term disability
insurance protection for the portion of the
annual base salary that is greater than
$300,000. The objective of this benefit is
to supplement the coverage provided by the
group long-term disability plan which
provides income protection up to an annual
base salary maximum of $300,000.
Eligibility Coverage is available to any
executive who participates in the group long-
term disability plan and has an annual base
salary of more than $300,000.
Coverage Coverage is automatic as long as
you meet the eligibility requirements.
Benefit amount The executive long-term disability plan
pays you a monthly benefit equal to 40% of
the portion of your annual base salary that
is greater than $300,000.
The executive long-term disability
benefit is in addition to your benefit from
the group long-term disability plan. It is
not affected by disability income benefits
from the group plan.
Cost The St. Paul pays the full cost of
the executive long-term disability plan.
Benefits are payable out of the general
assets of The St. Paul.
Definition of You are disabled if you are limited
disability from performing the material and substantial
duties of your regular position due to
illness or injury and you also have a 20
percent or more loss in your indexed monthly
earnings due to the same illness or injury.
If you are disabled for more than 24
months, you will continue to receive a
benefit if you are:
- Working in any occupation and continue to
have a 20 percent or more loss in your
monthly earnings due to your illness or
injury, or
|
- Not working and, due to the same
illness or injury, are unable to perform
the duties of any gainful occupation for
which you are reasonably suited by education,
training or experience.
When benefits You become entitled to an executive long-
begin term disability benefit when you are entitled
to a benefit from the group long-term
disability plan. Generally, you will receive
a benefit if you have been disabled 90
consecutive days and are also under a
physician's regular care.
When benefits end The executive long-term disability benefit
continues to be paid to you as long as you
also receive the group long-term disability
benefit. Both benefits end when one of the
following events occur:
- Recovery from the disability.
- No longer under a physician's regular care.
|
- End of the maximum benefit period:
Disability begins at age Maximum period ------------------------ -------------- Less than age 62 To age 67 62 42 months 63 36 months 64 but less than age 65 30 months |
- Your current earnings exceed 80 percent of your pre-disability income.
- During the first 24 months of your benefit payments, when you are able to work in your regular occupation on a part-time basis but choose not to work.
- After 24 months of benefit payments, when you are able to work in any occupation on a part-time basis but choose not to work.
- If you receive benefits due to mental
disability, your maximum benefit period is
24 months unless you are hospitalized or
institutionalized at the end or after the
24- month period. See the employee
benefit book "For your Benefit" for
additional information.
- Death.
Recurring If you try to return to work and
disability become disabled again, the recurrent
disability will be treated as part of the
prior disability; if, after receiving
disability benefits, you meet both of the
following requirements:
- Return to your regular occupation or
another occupation with
The St. Paul on a full-time basis for less
than 180 days.
- Perform all the material and substantial
duties of your occupation or another
occupation with the company.
If you return to your regular occupation or
another occupation with The St. Paul on a
full-time basis for 180 days or more, a
recurrent disability will be treated as a new
period of disability. This means you must
complete a new 90 day waiting period.
Taxes The executive long-term disability
benefits you receive are taxable in the year
of payment.
Filing a claim If you have been disabled for 60
days and your disability appears likely to
continue, you should contact the Corporate
Benefits Department to apply for benefits.
Employment status Your executive long-term disability
changes coverage ends upon your retirement or
termination from The St. Paul.
|
If you are receiving executive long-term
disability benefits when you reach age 65
(mandatory retirement age for officers of the
company) your benefits will continue until an
event listed in the "When benefits end"
section occurs.
If you are receiving executive long-term
disability benefits at the time of your
death, the plan will pay your eligible
survivor a lump sum benefit equal to three
times your gross monthly benefit under the
plan. Your spouse is your eligible survivor
if he or she is living. Otherwise, your
eligible survivors are your children under
age 25 or a person the company names to
receive payment on your children's behalf.
Plan The company has full and final
administration authority to interpret the terms of the plan
and determines the eligibility for the amount
of benefits payable under the plan.
Although The St. Paul currently intends to
continue this plan indefinitely, it reserves
the right to change, amend, or terminate the
plan (including any benefits payable under
the plan) at any time prior to your
disability. However, the company may not
amend the plan after you become disabled to
reduce the amount of benefits payable to you.
|
Exhibit 10(i)
January 18, 1998
Mr. Norman Blake
7117 Bellona Avenue
Baltimore, MD 21212
Dear Mr. Blake:
Pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), dated as of January 19, 1998, among Parent ("Parent"), Merger Subsidiary ("Sub") and USF&G Corporation (the "Company"), Sub will merge with and into the Company ("Merger"), subject to the terms and conditions set forth in the Merger Agreement. Capitalized terms which are used but not defined herein shall have the meanings ascribed to such terms in the Severance Agreement (as defined below) or in the Merger Agreement.
The purpose of this letter agreement is to confirm our respective understandings and agreements with regard to:
- The Key Executive Severance Agreement dated February 27, 1997 (the "Severance Agreement") between the Company and Norman Blake (the "Executive").
- The Executive's duties with the Parent after the Merger is completed, and the remuneration to be paid by Parent to the Executive for such services.
Parent has requested that for its and its shareholders' benefit, the Company and the Executive enter into this Agreement.
In the event the Merger is ultimately consummated, the Parent agrees to make those payments to which Executive is entitled pursuant to the Severance Agreement (the "Severance Payments") and to otherwise honor the terms of the Severance Agreement or otherwise cause the Severance Payments to be made and the terms honored. For purposes of this agreement, Parent, the Company and the Executive agree that upon the approval of the shareholders of the Company of the Merger Agreement, a Change in Control will have occurred for purposes of the Severance Agreement. Executive agrees that his Severance Payments will be made to him no earlier than the date which is one hundred eight (108) days following the date the Merger is consummated and no later than one hundred twenty five (125) days following the date the Merger is consummated; it being understood that Executive shall be paid interest on the Severance Payments at the Prime Rate from the date that the Merger is consummated until the payment date.
In the event that the Merger is ultimately consummated, the Executive shall be appointed to the Parent's Board of Directors for a term that shall expire on May 4, 1999. The Executive shall serve as Vice Chairman of the Parent's Board and report to the Chairman of the Parent's Board. The Executive shall act in the role of independent consultant and counselor to the Parent's Chairman and other designated executives until December 31, 1998, and, as such, during that time, shall not be an employee of the Parent, the Sub or the Company and shall not have direct reports who are employees of the Parent, the Sub or the Company. The Executive may be employed on a full-time basis by a third-party at any time after the date the Merger is consummated and during the consulting term, provided that such employment does not conflict with the non-compete and confidentiality covenants recited below and that such employment does not materially interfere with the performance of Executive's duties under the consulting agreement.
The Executive's principal responsibility during this Board term shall be to assist in the integration of the Sub and the Company. The Executive's specific duties shall be those assignments made by the Parent's Chairman to the Executive from time to time during the term of this letter agreement.
The Executive and the Parent agree that between the date this letter agreement is signed and the date that the Merger is consummated, the parties shall negotiate and intend to enter into a detailed consulting agreement, the effectiveness of which shall be conditioned upon the occurrence of the Merger. In addition to reiterating the Executive's duties as described above, Parent agrees that such agreement will include remuneration as follows:
- A guaranteed consulting fee ("Consulting Fee") in the amount of Seven Hundred Twenty-Five Thousand Dollars ($725,000.) payable in equal installments, prorated over the period of time commencing on the date the Merger is consummated and concluding on December 31, 1998. All prorated installments of the Consulting Fee shall be paid to the Executive within five days after the close of the calendar month in which earned.
- A performance-based incentive fee ("Incentive Fee") to be paid to the Executive based on the same earnings per share measurement criteria contained in the 1998 annual incentive plan for the Parent's Chairman of the Board. The Executive's Incentive Fee will be a percentage of his Consulting Fee, that percentage to equal the ratio of the Parent Chairman's 1998 actual annual incentive award as the numerator and the Parent Chairman's 1998 annualized base salary rate as the denominator.
- The Executive shall receive Twenty-Five Thousand (25,000) Stock Appreciation Rights ("SAR's") with a term of four years from the consummation of the Merger and a stock price equal to the fair market value on the date the Merger is consummated.
- Continued medical insurance benefits coverage at the Parent's expense, under the Company's or the Parent's regular or retiree plan, or by individual policy.
- To the extent allowed by the respective Company stock option plans, i) Executive's employment will be deemed to continue during the consulting period solely for the purpose of enabling Executive to exercise outstanding Company stock options during the consulting period, and ii) Executive will be deemed to retire for purposes of such plans, allowing one (1) year to exercise options after the end of the consulting period.
In exchange for the remuneration outlined above, in addition to the consultation services to be rendered by the Executive during the term of the consulting agreement, the Executive agrees to provide the Parent and all its affiliates with the following convenants of confidentiality and non-competition:
- Executive shall keep confidential any trade secrets and confidential or proprietary information of the Parent and its affiliates (including the Company) which are now known to him or which hereafter may become known to him as a result of his employment or association with the Parent and its affiliates and shall not at any time directly or indirectly disclose any such information to any person, firm or corporation, or use the same in any way other than in connection with the business of the Parent or its affiliates during and at all times after the expiration of the consultancy period. For purposes of this agreement, "trade secrets and confidential or proprietary information" means information unique to the Parent or any of its affiliates which has a significant business purpose and is not known or generally available from sources outside the Parent or any of its affiliates or typical of industry practice.
- The Executive convenants that he will not, without the prior written consent of the Parent, during the Term of this Agreement and for a period of one (1) year following the date he ceases, for whatever reason, serving on the Parent's Board of Directors or serving as a consultant or counselor to the Parent's executive management, whichever date is later, either individually or in partnership or jointly or in conjunction with any person as principal, agent, employee, shareholder (other than by way of holding shares listed on a stock exchange in a number not exceeding five percent of the outstanding class or series of shares so listed), consultant or in any other manner whatsoever carry on, be engaged in, advise, lend money to, guarantee the debts or obligations of or permit his name or any part thereof to be used or employed by, any person engaged in a business if a material portion of that business is in direct competition with any significant business of the Parent or any of its material affiliates.
Except as expressly set forth herein, this letter agreement shall not be deemed to affect or modify any provision of the Severance Agreement.
This letter agreement may not be amended or terminated without the prior written consent of the Company, the Executive and the Parent.
This letter agreement may be executed in any number of counterparts which together shall constitute but one agreement.
This letter agreement may not be assigned by any party hereunto and shall be binding on and inure to the benefit of their respective successors and, in the case of the Executive, heirs and other legal representatives.
Each of Parent, the Company, Sub and the Executive has caused this letter agreement to be duly executed as of the date first above written.
MERGER SUBSIDIARY THE ST. PAUL COMPANIES, INC.
By: /s/ Douglas W. Leatherdale By: /s/ Douglas W. Leatherdale
-------------------------- --------------------------
Douglas W. Leatherdale Douglas W. Leatherdale
EXECUTIVE USF&G CORPORATION
/s/ Norman P. Blake By: /s/ Norman P. Blake
------------------- -------------------
Norman P. Blake Norman P. Blake
|
EXHIBIT 11
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Computation of Earnings per Common Share
(In thousands, except per share amounts)
Twelve Months Ended
December 31,
---------------------------
1997 1996 1995
----- ----- -----
INCOME AVAILABLE TO COMMON SHARES:
BASIC
Net income, as reported $705,473 $450,099 $521,209
Adjusted for:
PSOP preferred dividends
declared (net of taxes) (8,645) (8,664) (8,582)
Premium on preferred shares redeemed (4,441) (1,033) (823)
------- ------- -------
Net income available to common shares $692,387 $440,402 $511,804
======= ======= =======
DILUTED
Net income, as reported $705,473 $450,099 $521,209
Adjusted for:
Additional PSOP expense (net of taxes)
due to assumed conversion of
preferred stock (2,647) (3,015) (3,477)
Dividends on monthly income preferred
securities (net of taxes) 8,073 8,073 5,046
Premium on preferred shares redeemed (4,441) (1,033) (823)
------- ------- -------
Net income available to common shares $706,458 $454,124 $521,955
======= ======= =======
|
WEIGHTED AVERAGE SHARES:
BASIC
Common shares 83,572 83,474 84,385
======= ======= =======
DILUTED
Common shares 83,572 83,474 84,385
Adjusted for:
Assumed conversion of preferred stock 3,894 3,969 4,027
Assumed conversion of monthly income
preferred securities 3,509 3,509 2,211
Outstanding stock options (based on
treasury stock method using average
market price during the period) 1,286 945 1,014
------- ------- -------
Weighted average, as adjusted 92,261 91,897 91,637
======= ======= =======
EARNINGS PER COMMON SHARE:
Basic $8.28 $5.28 $6.07
======= ======= =======
Diluted $7.66 $4.94 $5.70
======= ======= =======
|
EXHIBIT 12
THE ST. PAUL COMPANIES, INC. AND SUBSIDIARIES
Computation of Ratios
(In thousands, except ratios)
Twelve Months Ended
December 31,
---------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
EARNINGS:
Income from continuing
operations before
income taxes $1,018,733 $699,136 $669,325 $573,525 $535,235
Add: fixed charges 73,863 70,802 65,590 58,355 59,881
--------- ------- ------- ------- -------
Income as adjusted $1,092,596 $769,938 $734,915 $631,880 $595,116
========= ======= ======= ======= =======
FIXED CHARGES AND
PREFERRED DIVIDENDS:
Fixed charges:
Interest costs $ 51,875 $ 48,703 $ 46,376 $ 39,659 $ 40,921
Rental expense (1) 21,988 22,099 19,214 18,696 18,960
------- ------- ------- ------- -------
Total fixed charges 73,863 70,802 65,590 58,355 59,881
Preferred stock dividends 17,477 17,863 18,120 18,337 18,488
Dividend on monthly income
preferred securities 12,420 12,420 7,763 - -
------- ------- ------- ------- -------
Total fixed charges
and preferred
dividends $ 103,760 $ 101,085 $ 91,473 $ 76,692 $ 78,369
======= ======= ======= ======= =======
Ratio of earnings to
fixed charges 14.79 10.87 11.20 10.83 9.94
======= ======= ======= ======= =======
Ratio of earnings to
combined fixed charges
and preferred
stock dividends 10.53 7.62 8.03 8.24 7.59
======= ======= ======= ======= =======
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1) Interest portion deemed implicit in total rent expense.
EXHIBIT 21
Subsidiaries of the Registrant State or
------------------------------ Other
Jurisdiction of
Name Incorporation
----- -----------
(1) St. Paul Fire and Marine Insurance Company Minnesota
Subsidiaries:
(i) St. Paul Mercury Insurance Co. Minnesota
(ii) St. Paul Guardian Insurance Co. Minnesota
(iii) The St. Paul Insurance Co. Texas
(iv) The St. Paul Insurance Co. of Illinois Illinois
(v) St. Paul Specialty Underwriting, Inc. Delaware
Subsidiaries:
(a) Athena Assurance Co. Minnesota
(b) St. Paul Medical Liability Insurance Co. Minnesota
(c) St. Paul Risk Services, Inc. Minnesota
(d) St. Paul Surplus Lines Insurance Co. Delaware
(vi) St. Paul Property and Casualty
Insurance Co. Nebraska
(vii) St. Paul Insurance Co. of North Dakota North Dakota
(viii) St. Paul Fire and Casualty Insurance Co. Wisconsin
(ix) Economy Fire & Casualty Co. Illinois
(a) Economy Preferred Insurance Co. Illinois
(b) Economy Premier Assurance Co. Illinois
(x) St. Paul Indemnity Insurance Co. Indiana
(xi) St. Paul Properties, Inc. California
Subsidiaries:
(a) 77 Water Street, Inc. Minnesota
(b) St. Paul Interchange, Inc. Minnesota
(c) 350 Market Street, Inc. Minnesota
(xii) Seaboard Surety Company New York
Subsidiary:
(a) Seaboard Surety Company of Canada Canada
(xiii) Northbrook Holdings, Inc. Delaware
Subsidiaries:
(a) Northbrook Indemnity Co. Illinois
(b) Northbrook National Insurance Co. Illinois
(c) Northbrook Property and Casualty
Insurance Co. Illinois
(xiv) St. Paul Management Services, Inc. Minnesota
(2) St. Paul Holdings Limited United Kingdom
Subsidiaries:
(i) St. Paul Reinsurance Company
Limited United Kingdom
(ii) St. Paul Management Limited United Kingdom
(iii) St. Paul Investment Services Ltd. United Kingdom
(iv) St. Paul Investments Ltd. United Kingdom
(v) St. Paul International Insurance
Company Limited United Kingdom
(vi) St. Paul Insurance Espana Seguros
Y Reaseguros, S.A. Spain
(vii) Camperdown UK Limited United Kingdom
(viii) New World Insurance Company Ltd. Guernsey
|
(ix) Cassidy Davis Underwriting
Agency Limited United Kingdom
Subsidiary:
(a) Cassidy Davis Insurance
Services Limited United Kingdom
(x) Cheverill Limited United Kingdom
Subsidiaries:
(a) Cassidy Davis Administrative
Services Limited United Kingdom
Subsidiaries:
(i) Cassidy Davis Europe BV United Kingdom
(ii) Cassidy Davis Syndicate
Management Limited United Kingdom
(b) Gravett & Tilling Holdings Limited United Kingdom
Subsidiary:
(i) Gravett & Tilling Syndicate
Management Limited United Kingdom
(xi) Lesotho National Insurance
Holdings Limited United Kingdom
(xii) St. Paul (Redhill) Limited United Kingdom
(xiii) St. Paul Surety Europe Limited United Kingdom
(3) St. Paul Re, Inc. New York
Subsidiary:
(i) Excess & Treaty Management Corporation New York
(4) The John Nuveen Company* Delaware
Subsidiaries:
(i) John Nuveen & Co. Incorporated Delaware
Subsidiaries:
(a) Nuveen Advisory Corp. Delaware
(b) Nuveen Institutional Advisory Corp. Delaware
(ii) Institutional Capital Corporation Delaware
(iii) Nuveen/Flagship Acquisition Corp. Delaware
Subsidiary:
(a) Nuveen Asset Management, Inc. Delaware
(iv) Rittenhouse Financial Services, Inc. Delaware
(5) St. Paul Argentina Compania de Seguros S.A. Argentina
(6) Camperdown Corporation Delaware
(7) St. Paul Capital L.L.C. Delaware
(8) St. Paul Multinational Holdings, Inc. Delaware
Subsidiaries:
(i) St. Paul Insurance Company (S.A) Limited South Africa
(ii) Botswana Insurance Company Limited Botswana
(iii) Cross-Border Agency Services, Inc. Minnesota
(iv) Seguros St. Paul de Mexico, S.A. de C.V. Mexico
|
(v) Servicios Administrativos St. Paul, S.A. de C.V. Mexico
(9) St. Paul Bermuda Holdings, Inc. Delaware
Subsidiaries:
(i) St. Paul (Bermuda), Ltd. Bermuda
(ii) St. Paul Re (Bermuda), Ltd. Bermuda
(10) St. Paul Venture Capital, Inc. Delaware
(11) St. Paul London Investments, Inc. Minnesota
Subsidiary:
(i) Minet Properties (1989) Limited United Kingdom
(12) St. Paul London Properties, Inc. Minnesota
*The John Nuveen Company is a majority-owned subsidiary jointly owned by The St. Paul, which holds a 64% interest, and Fire and Marine, which holds a 13% interest.
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
The St. Paul Companies, Inc.:
We consent to incorporation by reference in the Registration Statements on Form S-8 (SEC File No. 2-69894, No. 33-15392, No. 33- 20516, No. 33-23446, No. 33-23948, No. 33-24220, No. 33-24575, No. 33-26923, No. 33-49273, No. 33-56987, No. 333-01065, No. 333-22329, No. 333-25203, No. 333-28915 and No. 333-48121), Form S-3 (SEC File No. 33-33931, No. 33-50115, No. 33-58491 and No. 333-06465) and Form S-4 (SEC File No. 333-47007) of The St. Paul Companies, Inc., of our reports dated January 26, 1998, relating to the consolidated balance sheets of The St. Paul Companies, Inc. and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of income, shareholders' equity, comprehensive income and cash flows for each of the years in the three-year period ended December 31, 1997, and all related schedules, which reports appear or are incorporated by reference in the December 31, 1997 annual report on Form 10-K of The St. Paul Companies, Inc.
Minneapolis, Minnesota /s/ KPMG Peat Marwick LLP
March 27, 1998 ---------------------
KPMG Peat Marwick LLP
|
EXHIBIT 24
Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, That I, the undersigned, a director of The St. Paul Companies, Inc., a Minnesota corporation ("The St. Paul"), do hereby make, nominate and appoint Bruce A. Backberg and Howard E. Dalton, or either of them, to be my attorney-in-fact, with full power and authority to sign on my behalf a Form 10-K for the year ended December 31, 1997, to be filed by The St. Paul with the Securities and Exchange Commission, and any amendments thereto, and shall have the same force and effect as though I had manually signed the Form 10-K or amendments.
Dated: February 3, 1998 Signature: /s/ Michael R. Bonsignore
-------------------------
Name: Michael R. Bonsignore
Dated: February 3, 1998 Signature: /s/ John H. Dasburg
-------------------
Name: John H. Dasburg
Dated: February 3, 1998 Signature: /s/ W. John Driscoll
--------------------
Name: W. John Driscoll
Dated: February 3, 1998 Signature: /s/ Pierson M. Grieve
---------------------
Name: Pierson M. Grieve
Dated: February 3, 1998 Signature: /s/ Thomas R. Hodgson
---------------------
Name: Thomas R. Hodgson
Dated: February 3, 1998 Signature: /s/ Ronald James
----------------
Name: Ronald James
Dated: February 3, 1998 Signature: /s/ David G. John
-----------------
Name: David G. John
Dated: February 3, 1998 Signature: /s/ William H. Kling
--------------------
Name: William H. Kling
Dated: February 3, 1998 Signature: /s/ Bruce K. MacLaury
---------------------
Name: Bruce K. MacLaury
|
Dated: February 7, 1998 Signature: /s/ Glen D. Nelson
------------------
Name: Glen D. Nelson
Dated: February 3, 1998 Signature: /s/ Anita M. Pampusch
---------------------
Name: Anita M. Pampusch
Dated: February 3, 1998 Signature: /s/ Gordon M. Sprenger
----------------------
Name: Gordon M. Sprenger
|
| ARTICLE 7 |
| RESTATED: |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | YEAR | YEAR | YEAR |
| FISCAL YEAR END | DEC 31 1997 | DEC 31 1996 | DEC 31 1995 |
| PERIOD END | DEC 31 1997 | DEC 31 1996 | DEC 31 1995 |
| DEBT HELD FOR SALE | 12,449,793 | 11,944,085 | 10,372,890 |
| DEBT CARRYING VALUE | 0 | 0 | 0 |
| DEBT MARKET VALUE | 0 | 0 | 0 |
| EQUITIES | 1,033,920 | 808,295 | 711,471 |
| MORTGAGE | 0 | 0 | 0 |
| REAL ESTATE | 649,114 | 693,910 | 611,656 |
| TOTAL INVEST | 15,036,082 | 14,365,616 | 12,558,111 |
| CASH | 22,660 | 37,214 | 25,475 |
| RECOVER REINSURE | 69,693 | 68,692 | 74,568 |
| DEFERRED ACQUISITION | 404,274 | 401,768 | 372,174 |
| TOTAL ASSETS | 21,500,657 | 20,680,976 | 18,519,294 |
| POLICY LOSSES | 11,817,633 | 11,673,148 | 10,247,070 |
| UNEARNED PREMIUMS | 2,379,703 | 2,566,551 | 2,361,028 |
| POLICY OTHER | 0 | 0 | 0 |
| POLICY HOLDER FUNDS | 0 | 0 | 0 |
| NOTES PAYABLE | 782,825 | 689,141 | 697,045 |
| PREFERRED MANDATORY | 207,000 | 207,000 | 207,000 |
| PREFERRED | 16,725 | 16,063 | 10,872 |
| COMMON | 512,162 | 475,710 | 460,458 |
| OTHER SE | 4,097,823 | 3,512,047 | 3,258,791 |
| TOTAL LIABILITY AND EQUITY | 21,500,657 | 20,680,976 | 18,519,294 |
| PREMIUMS | 4,616,456 | 4,448,248 | 3,971,329 |
| INVESTMENT INCOME | 886,213 | 807,305 | 740,912 |
| INVESTMENT GAINS | 408,110 | 218,525 | 84,572 |
| OTHER INCOME | 308,494 | 260,078 | 259,386 |
| BENEFITS | 3,345,168 | 3,318,301 | 2,864,307 |
| UNDERWRITING AMORTIZATION | 1,021,623 | 975,456 | 856,979 |
| UNDERWRITING OTHER | 833,749 | 741,263 | 665,588 |
| INCOME PRETAX | 1,018,733 | 699,136 | 669,325 |
| INCOME TAX | 245,510 | 141,278 | 131,477 |
| INCOME CONTINUING | 773,223 | 557,858 | 537,848 |
| DISCONTINUED | (67,750) | (107,759) | (16,639) |
| EXTRAORDINARY | 0 | 0 | 0 |
| CHANGES | 0 | 0 | 0 |
| NET INCOME | 705,473 | 450,099 | 521,209 |
| EPS PRIMARY | 8.28 | 5.28 | 6.07 |
| EPS DILUTED | 7.66 | 4.94 | 5.70 |
| RESERVE OPEN | 11,673,148 | 10,247,070 | 9,423,429 |
| PROVISION CURRENT | 3,833,468 | 3,570,545 | 3,112,193 |
| PROVISION PRIOR | (488,300) | (252,244) | (247,886) |
| PAYMENTS CURRENT | 982,822 | 1,101,077 | 783,633 |
| PAYMENTS PRIOR | 2,228,083 | 1,839,463 | 1,590,701 |
| RESERVE CLOSE | 11,817,633 | 11,673,148 | 10,247,070 |
| CUMULATIVE DEFICIENCY | 410,000 | 246,000 | (199,000) |