St. Paul to Transfer Reinsurance to Bermuda; Will Retain Minority Stake

April 26, 2002

The St. Paul Companies announced plans to transfer its ongoing reinsurance operations to a newly-formed Bermuda-based reinsurer, Platinum Underwriters Holdings, Ltd. which intends to make a public offering of 75.1 percent of its common shares in order to raise approximately $1 billion in capital for its operations.

The St. Paul announcement indicated that the “operations, employees and assets of St. Paul Re” would be transferred to Platinum, and that it would retain a 24.9 percent minority stake in the new company.

The plan calls for Platinum to reinsure St. Paul Fire and Marine Insurance Company and St. Paul Reinsurance Company Limited “for certain reinsurance contracts incepting in 2002,” upon completion of the public offering. In addition the announcement indicated that, “The St. Paul will also transfer certain renewal opportunities and related assets of The St. Paul’s reinsurance operation, St. Paul Re, in exchange for a 24.9 percent stake in the new company, which will have 9.9 percent of the voting rights.”

It stated, however, that “Platinum will not reinsure the reinsurance liabilities of St. Paul Fire and Marine Insurance Company and St. Paul Reinsurance Company Limited relating to reinsurance contracts incepting prior to January 1, 2002. The St. Paul will retain the reserves related to those liabilities.”

Jerry Fadden, who was named chief executive officer of St. Paul Re on March 6, 2002 will become the CEO of Platinum and a member of its Board of Directors.

Steven H. Newman was named as chairman of the board. He was formerly the chairman, president and CEO of Underwriters Re Group prior to its acquisition in May 2000 by Swiss Re.

The move by the St. Paul to radically transform its reinsurance operations had not been totally unexpected. Many analysts had concluded that the company wanted to divest its reinsurance operations, which were primarily responsible for a sharp earnings drop, primarily due to the heavy losses caused by the Sept. 11 attacks.

At the same time, however the St. Paul retains a substantial interest in a new, Bermuda-based reinsurer, which joins a number of other new billion dollar reinsurance ventures that have set up shop on the island. If past performance is any guide, Platinum should have few problems raising the money it needs from its IPO.

St. Paul chairman and CEO Jay Fishman, who’ll serve on Platinum’s board, stated that the move “is yet another step to improve the competitive positioning of The St. Paul.” He indicated that, “In addition to enhancing the competitive positioning of our reinsurance operations, it will, over time, free up capital to build our core commercial lines, specialty property and casualty, and asset management businesses.”

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