The St. Paul Cos. Notes 2ndQ Loss

July 24, 2002

The St. Paul Companies announced a second-quarter 2002 net loss of $223 million, or $1.09 per diluted share, including the previously announced $380 million after-tax impact of its settlement of the Western MacArthur litigation in June 2002.

The company reported a second-quarter operating loss of $193.8 million, or $0.95 per diluted share. Excluding the impact of the Western MacArthur settlement, operating earnings per diluted share were $0.84 for the quarter and $1.60 for the first six months of 2002, compared with $0.39 and $1.08 for the comparable periods of 2001.

Total reported revenues, which include both core and runoff operations, increased 7 percent to $2.3 billion. Net written premiums in core underwriting businesses were up 21 percent from the prior-year period to $1.5 billion, reflecting average price gains of more than 26 percent in the U.S. core businesses.

In the second quarter, Nuveen continued its record of producing consistent earnings and quality growth in challenging market environments. Assets under management grew to $68.5 billion at the end of the quarter, an increase of 9 percent from $63.0 billion on June 30, 2001. Nuveen’s recently announced acquisition of U.S.-based NWQ Investment Management will add high-quality, value-oriented institutional and additional managed account equity expertise to its core growth, fixed income and alternative investment offerings. The transaction is expected to close by the end of August, adding approximately $7 billion to assets under management.

Pretax catastrophe losses in core businesses in the quarter were $22.7 million, down from $43.7 million in the same quarter last year. Catastrophe losses from businesses in runoff were insignificant in the second quarter of 2002, compared with $25 million in second-quarter 2001.

The core business expense ratio improved to 27.6 from 28.6, while the reported expense ratio improved to 28.7 from 29.3. The company has made substantial progress toward its stated goal of eliminating both $75 million in expenses directly associated with runoff businesses and $50 million in corporate expenses and expects to reach its goal by the end of the year.

During the second quarter, the company reduced its public equity holdings in its property-liability portfolio from a market value of approximately $1 billion to approximately $500 million, with realized investment losses of less than $17 million. Public equities constituted slightly more than 2 percent of the aggregate $21 billion investment portfolio at the end of the quarter.

The venture capital portfolio was valued at $821 million on June 30, compared with a cost basis of $781 million.

In December 2001, the company announced that it would exit its worldwide Health Care business, significantly reposition its Reinsurance and Lloyd’s operations, and exit a number of non-U.S. primary insurance markets. The businesses being exited are termed “runoff” businesses. Ongoing operations are considered “core” businesses.

In the second quarter of 2002, the company announced its intention to sell the ongoing reinsurance operations of St. Paul Re to Platinum Underwriters Holdings, Ltd., upon Platinum’s completion of its initial public offering. The company intends to execute this strategy as capital market conditions allow. As a result, all Reinsurance underwriting operations are now being termed “runoff.”

The St. Paul continues to focus on repositioning its insurance business mix, promoting greater earnings predictability and building on its financial strength and liquidity. The company’s capital base at the end of the second quarter was approximately $8 billion.

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