S&P Affirms St. Paul Cos. Inc. and Subsidiaries Ratings

April 26, 2002

Standard & Poor’s has affirmed its single-‘A’-minus long-term counterparty credit rating on St Paul Cos. Inc. following the company’s announcement of first-quarter 2002 pretax operating earnings of $233.8 million and net income of $139.3 million. Standard & Poor’s also has affirmed its double-‘A’-minus counterparty credit and financial strength ratings on St. Paul’s insurance subsidiaries. The outlook on all these companies is negative.

St. Paul also plans to transfer its reinsurance operations to a newly-formed Bermuda-based insurer—Platinum Underwriting Holdings Ltd.—in exchange for a nearly 25 percent stake in the new company.

The initial public offering is expected to result in capital of approximately $1 billion. St. Paul expects to realize a capital gain, the amount of which depends on the results of the offering. Standard & Poor’s said it would view the transaction as a positive development, as it allows management to focus on its core book of business and restructuring of its operations.

The outlook is negative because of the execution risk of significant restructuring and weakened capital adequacy of St. Paul. The outlook reflects the challenges facing St Paul in 2002 in exiting its health care business and implementing the restructuring of its worldwide operations, along with potential exposure to further World Trade Center-related loss development. Standard & Poor’s said it expects significant improvement in St. Paul’s pretax earnings, capital adequacy, and combined ratio through year-end 2002.

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