The St. Paul Travelers Companies, Inc. (NYSE:STA) announced that the company reached a conclusion on the accounting treatment for the previously announced reserve adjustments and will record the adjustments as a charge to the income statement in the second quarter of 2004.
Consistent with the prior earnings estimate, St. Paul Travelers said it expects to report a second quarter 2004 net loss in the range of $275 million to $300 million, or $0.42 to $0.45 per basic and diluted share. Second quarter 2004 operating loss would be in the range of $310 million to $335 million, or $0.47 to $0.51 per basic and diluted share. The difference in net loss and operating loss represents $35 million, after-tax, of realized investment gains. Also as previously reported, St. Paul Travelers said it will not raise additional capital in connection with these adjustments.
On July 23, 2004, St. Paul Travelers announced that it was seeking guidance from the staff of the Securities and Exchange Commission (SEC) with respect to the appropriate accounting principles for certain reserve adjustments being made in connection with the April 1, 2004 merger involving The St. Paul Companies, Inc. and Travelers Property Casualty Corp. The SEC staff has now provided general guidance and, based on this guidance, St. Paul Travelers determined that it was appropriate to reflect the adjustments in the income statement.
Jay Fishman, chief executive officer of St. Paul Travelers, said, “We appreciate the cooperation we received from the SEC staff and their assistance in helping us reach our conclusions on these complicated accounting issues. We look forward to moving ahead as a combined company and growing this franchise.”
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