St. Paul Travelers Reports All Segments ‘Strong’ in 2nd Quarter

July 28, 2005

The St. Paul Travelers Companies, Inc. reported record net income for the current quarter of $1.069 billion, or $1.59 per basic share and $1.52 per diluted share, compared to a net loss of $275 million, or $0.42 per basic and diluted share, in the prior year quarter.

Net income for the current quarter included a $138 million after-tax gain from discontinued operations, primarily related to the partial disposition of St. Paul Travelers’ equity stake in Nuveen Investments, Inc. Income from continuing operations was a record $931 million for the current quarter, or $1.39 per basic share and $1.33 per diluted share, compared to a loss of $302 million, or $0.46 per basic and diluted share, in the prior year quarter.

Operating income for the current quarter was a record $966 million, or $1.44 per basic share and $1.38 per diluted share, compared to a loss of $337 million, or $0.51 per basic and diluted share, in the prior year quarter. The current quarter results included a net after-tax benefit of $50 million ($75 million pre-tax) for favorable prior year reserve development primarily in the personal lines segment. The prior year quarter included an after-tax charge of $925 million ($1.397 billion pre-tax) for net unfavorable reserve development for years prior to 2004 and other after-tax charges of $141 million ($217 million pre-tax). Operating income is net income excluding the after-tax impact of net realized investment gains (losses) and discontinued operations.

Highlights for the quarter included:

— Operating return on equity of 18.6 percent (excluding FAS
115).

— GAAP combined ratio of 87.6 percent.

— Strong performance in all business segments. The commercial,
specialty and personal lines segments reported after-tax operating
income of $530 million, $221 million and $266 million,
respectively, and combined ratios of 89.5 percent, 90.9
percent and 81.6 percent, respectively.

— Net favorable prior year reserve development of $50 million
after-tax, primarily related to continued favorable prior year
loss trends in the personal segment.

— Gross written premiums unchanged and net written premiums up 2
percent from the prior year quarter.

Jay Fishman, president and chief executive officer, said the company was pleased with the performance for the quarter, with all of its segments recording very strong results. He noted that a 22 percent increase in net investment income over the comparable quarter last year was a contributing factor.

“Our top line story is increasingly encouraging. Gross written premiums in a number of our business lines posted growth in the quarter. We have done a very good job of retaining our business, generating strong retention levels that are at historically high levels. New business premiums in commercial and specialty are higher this quarter than they have been in each of the last three quarters. The rates for business renewed are such that margins continue to be attractive,” Fishman added.

“This quarter we completed a number of initiatives that significantly strengthened our financial flexibility and capital position. Our statutory capital was increased by the record earnings generated during the first six months of this year and will be further increased by the addition of the majority of the proceeds related to the Nuveen divestiture. Statutory capital ratios were also enhanced by the combination of the Travelers Property Casualty and St. Paul Companies insurance pools. In addition, over the last six months we reduced our total debt by over $800 million, including the elimination of the Nuveen debt. We are pleased to have received updated financial strength ratings of A+ from A.M. Best and Aa3 from Moody’s for the recently combined insurance pool.”

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