Based on St. Paul’s astounding disregard for sound financial management,their fail-ure to disclose the 1.6 Billion Dollar Charge was to be expected… The announce-ment of the 1.6 Billion Dollar oversight didn’t surprise me in the leaset.
Here’s a reprint of my 3/30/04 Insurance Journal post about the merger:
Posted On: March 30, 2004, 3:48 pm EST
Posted By: Jane Logan, CPCU
Comment:
Our agency represents Travelers, however the following comments are my personal opinion, not that of my employer:
To me, St. Paul has always exemplified everything that’s wrong with this industry-short term planning (cash flow underwriting) to maximize short term financial goals in an industry that requires long term planning for financial stability and survival.
St. Paul jumps in and out of markets (Medical Malpractice) disrupting the marketplace and leaving insureds scrambling to secure replacement coverage.
If you take a look at their most recent (400 page) SEC report, their cash flow underwriting philosophy is obvious.
St. Paul also buys the “right to renew” books of business from other carriers. In December of 2001 (two months after September 11th) St. Paul bought Fireman’s Fund Surety Book which included a large book of Contractor Bid, Payment and Performance Bonds.
In a surprisingly short sighted decision (even for St. Paul) they bought the “right” to guarantee the performance of the lowest bidding Contractors that Fireman’s Fund determined were qualified (barely I’m sure) for Bonding under much better economic conditions.
St. Paul’s Bond book experienced HUGE losses over the past two years and they expect more losses in the future. St. Paul, once the 2nd largest Bond carrier in North America is now in the process of exiting the Contractor Bond Market and plans to write only low risk, low penalty bonds.
It is also my understanding St. Paul is refusing to pay claims under Payment and Performance Bonds. For example, subcontractors that worked on the Cape Cod Regional Transit Center in Hyannis, MA 02601 were not paid by the now bankrupt General Contractor, and St. Paul has not paid out under the Payment Bond. The Cape Cod Regional Transit Authority has to complete and repair the new transit center facility without the benefit of Bond claim payments.
The CCRTA has been forced to initiate litigation, a process Performance Bonds are supposed to eliminate.
Requiring that the “low bidder” be awarded public construction projects makes the system totally dependent on Payment and Performance Bonds to guarantee the contractors performance.
These bond guarantees are not unlike the FDIC backing of failed banks.
Let’s hope St. Travelers doesn’t have any plans to merge with the FDIC or we’ll all be in very big trouble…
As someone who worked for Travelers in the mid and late 1990’s, i find it hard to believe that they merged with such a nafrious company as St. Paul’s. It is truly disheartening.
In their March SEC report St. Paul mentions their Bond Book-how they’ve suffered horrible losses and their plans to get out of the Contractor Bond market and only write low risk, low penalty bonds.
Even though it appears my worst fears about the merger may materilize, I’m not happy about being right-I’m horrified.
Travelers has been one of my favorite companies since I was a Personal Lines CSR over 20 years ago. It really is upsetting to see a fine company likes Travelers brought down to St. Paul’s “lower than a snake’s belly” level in such short order.
It’ll be interesting to see what happens with the SEC and Shareholder Class Action Suit.
Dont’ know how a story on a Class Action Lawsuit evolved into Bailing on Bonds but I’ll join in.
Disagree St. Paul Travelers (How I hate that name) will exit Contract Surety. Travelers went through their Surety problems in the late 70’s. Since they got Aetna’s bond operation, it has grown and prospered utilizing conservatism and capacity.
As to dodging claims, I’ve been at this 35 years, and it doesn’t happen. There are always disagreements on Payment Bond claims and they frequently are ultimately paid by the contractor with nudging from the Surety to settle the disputes.
I’ve never known a legitimate surety to refuse a proper claim – how do they lose those humongous dollars without paying?
For those of you who looked and couldn’t find “nafrious” in your Funk & Wagnal, it’s because it is spelled “nefarious.” For those of you who don’t have a Funk & Wagnal and don’t know the meaning of the term, “nefarious” is defined as “extremely infamous or wicked.”
Travelers handles all Carl’s Jr. chains which employs many undocumented aliens, Carl’s Jr. has highest % of fraudulent claims among the fast food industry.
There is probably a lot of Merit to this allegation since Jay Fishman who was formerally with Travelers aka Citicorp went to St. Paul Ins Co. and then went back to Travelers as if it was his life blood. Things that make you go hummmm
Based on St. Paul’s astounding disregard for sound financial management,their fail-ure to disclose the 1.6 Billion Dollar Charge was to be expected… The announce-ment of the 1.6 Billion Dollar oversight didn’t surprise me in the leaset.
Here’s a reprint of my 3/30/04 Insurance Journal post about the merger:
The Insurance Journal
http://www.insurancejournal.com/comments/?a=/news/national/2004/03/30/40538.htm&c=354
Posted On: March 30, 2004, 3:48 pm EST
Posted By: Jane Logan, CPCU
Comment:
Our agency represents Travelers, however the following comments are my personal opinion, not that of my employer:
To me, St. Paul has always exemplified everything that’s wrong with this industry-short term planning (cash flow underwriting) to maximize short term financial goals in an industry that requires long term planning for financial stability and survival.
St. Paul jumps in and out of markets (Medical Malpractice) disrupting the marketplace and leaving insureds scrambling to secure replacement coverage.
If you take a look at their most recent (400 page) SEC report, their cash flow underwriting philosophy is obvious.
St. Paul also buys the “right to renew” books of business from other carriers. In December of 2001 (two months after September 11th) St. Paul bought Fireman’s Fund Surety Book which included a large book of Contractor Bid, Payment and Performance Bonds.
In a surprisingly short sighted decision (even for St. Paul) they bought the “right” to guarantee the performance of the lowest bidding Contractors that Fireman’s Fund determined were qualified (barely I’m sure) for Bonding under much better economic conditions.
St. Paul’s Bond book experienced HUGE losses over the past two years and they expect more losses in the future. St. Paul, once the 2nd largest Bond carrier in North America is now in the process of exiting the Contractor Bond Market and plans to write only low risk, low penalty bonds.
It is also my understanding St. Paul is refusing to pay claims under Payment and Performance Bonds. For example, subcontractors that worked on the Cape Cod Regional Transit Center in Hyannis, MA 02601 were not paid by the now bankrupt General Contractor, and St. Paul has not paid out under the Payment Bond. The Cape Cod Regional Transit Authority has to complete and repair the new transit center facility without the benefit of Bond claim payments.
The CCRTA has been forced to initiate litigation, a process Performance Bonds are supposed to eliminate.
Requiring that the “low bidder” be awarded public construction projects makes the system totally dependent on Payment and Performance Bonds to guarantee the contractors performance.
These bond guarantees are not unlike the FDIC backing of failed banks.
Let’s hope St. Travelers doesn’t have any plans to merge with the FDIC or we’ll all be in very big trouble…
-Jane Logan, CPCU
e-here’s my
As someone who worked for Travelers in the mid and late 1990’s, i find it hard to believe that they merged with such a nafrious company as St. Paul’s. It is truly disheartening.
This is the first Class Action Suit I ever thought had merit.
When Mr. Fishman announced it to be a “merger of equals”, I thought his statement misleading. Now some other shareholders agree.
Any sort of due dilligence would disclose St. Paul, as a leading Contract Bond writer, had different reserving practices than Travelers.
One can only conclude Mr. Fishman proposed the merger to Mr. Lipp for either personal “empire building” reasons; OR to bail out his sinking ship.
In either event, Mr. Lipp was NOT minding the store for his shareholders.
Jane,
Are you predicting that St. Paul will get out the the contractor’s lines of business altogether?
Larry:
In their March SEC report St. Paul mentions their Bond Book-how they’ve suffered horrible losses and their plans to get out of the Contractor Bond market and only write low risk, low penalty bonds.
Even though it appears my worst fears about the merger may materilize, I’m not happy about being right-I’m horrified.
Travelers has been one of my favorite companies since I was a Personal Lines CSR over 20 years ago. It really is upsetting to see a fine company likes Travelers brought down to St. Paul’s “lower than a snake’s belly” level in such short order.
It’ll be interesting to see what happens with the SEC and Shareholder Class Action Suit.
Who says insurance is boring…?!
Jane what agency do you work for? I believe we have done business before. Just wondering! :-)
Dont’ know how a story on a Class Action Lawsuit evolved into Bailing on Bonds but I’ll join in.
Disagree St. Paul Travelers (How I hate that name) will exit Contract Surety. Travelers went through their Surety problems in the late 70’s. Since they got Aetna’s bond operation, it has grown and prospered utilizing conservatism and capacity.
As to dodging claims, I’ve been at this 35 years, and it doesn’t happen. There are always disagreements on Payment Bond claims and they frequently are ultimately paid by the contractor with nudging from the Surety to settle the disputes.
I’ve never known a legitimate surety to refuse a proper claim – how do they lose those humongous dollars without paying?
For those of you who looked and couldn’t find “nafrious” in your Funk & Wagnal, it’s because it is spelled “nefarious.” For those of you who don’t have a Funk & Wagnal and don’t know the meaning of the term, “nefarious” is defined as “extremely infamous or wicked.”
Travelers handles all Carl’s Jr. chains which employs many undocumented aliens, Carl’s Jr. has highest % of fraudulent claims among the fast food industry.
enquiring minds want to know.
There is probably a lot of Merit to this allegation since Jay Fishman who was formerally with Travelers aka Citicorp went to St. Paul Ins Co. and then went back to Travelers as if it was his life blood. Things that make you go hummmm