in St. Paul
Staking Out The Vampires at St. Paul Travelers Companies!
Sightings from The Catbird Seat
~ o ~
June 18, 2009
Court upholds settlement in asbestos lawsuits
WASHINGTON -- The Supreme Court has agreed to reinstate a roughly $500 million settlement of asbestos lawsuits against the Travelers Companies Inc.
Travelers had been named in lawsuits alleging that it tried to hide dangerous health effects of asbestos. The company argued that asbestos claims be paid out of a trust created by Johns Manville in the 1980s and approved by a federal bankruptcy judge.
Travelers settled with several groups of plaintiffs with the caveat that federal courts make clear the company would not have to face any new similar lawsuits.
The 2nd U.S Circuit Court of Appeals in New York overturned lower-court approval of the settlement, saying a bankruptcy judge lacks the authority to act so broadly.
The high court overturned that decision.
November 22, 2008
Pressure on Citigroup builds,
shares fall below $4
By MADLEN READ, Associated Press
Pressure intensified on Citigroup to sell part or all of itself as its stock fell below $4 a share on Friday and fears escalated about future loan losses.
CEO Vikram Pandit told managers earlier in the day he opposes breaking up the company, but the bank's board of directors was meeting Friday to discuss whether to do exactly that, the Wall Street Journal reported.
What investors are worried about is that all the risky debt sitting on Citigroup's balance sheet will eventually turn into losses as the economy worsens and the markets stay turbulent - losses that could be nearly impossible to reverse.
Investors were also fearful that the government might orchestrate a takeover of Citigroup over the weekend that could wipe out common shareholders, said Paul Miller, a Friedman Billings Ramsey banking analyst.
The government was instrumental in JPMorgan Chase & Co.'s buyout of Bear Stearns and Washington Mutual Inc., deals that left shareholders with little or no payouts.
The Treasury Department, the Federal Reserve and other banking regulators are monitoring the situation, government officials said. They spoke on condition of anonymity because of the sensitive nature of the matter.
Concerns about the solvency of financial institutions were starting to ebb after the downfall earlier in the year of Bear Stearns Cos., Lehman Brothers Holdings Inc., and American International Group Inc. But now they are back with a vengeance as the recession deepens, raising the prospects of even more massive loan losses.
Just a couple months ago, Citigroup was the largest bank in the world by assets, stretching into everything from credit cards to consumer banking to high-stakes corporate dealmaking. The company was the result of an idea spawned by the financial deregulation in the late 1990s - that consumers and corporations alike would be better served by a bank that could meet all of their needs...
Citigroup's shares tumbled as low as $3.05 a share Friday before recovering to close at $3.77 a share, a decline of 20 percent that left them at their lowest level in nearly 16 years. It was a continuation of a sharp, weeklong plunge that could not be stemmed by Saudi investor Prince Alwaleed bin Talal's decision Thursday to raise his stake in the company to 5 percent from less than 4 percent.
The shares have shed 60 percent of their value since last Friday.
Citigroup has already raised $75 billion in capital this year, including a $25 billion cash investment from the government - and none of it has been enough to muster confidence....
Citigroup could also consider a merger rather than an outright sale.
"A merger is indeed a possibility at this point," Fitzpatrick said. He said there are a number of firms that would be eager to take over some of Citigroup's businesses - particularly a company like Goldman Sachs Group Inc., an investment bank that recently turned into a bank holding company and is now on the prowl for deposits.
The bank has been rushing to get leaner and wind down its assets backed by risky debt. Monday, Citigroup said it will cut 53,000 jobs, on top of 22,000 cuts previously announced. On Wednesday, the bank said it is acquiring the remaining $17.4 billion in assets held by complex debt products known as structured investment vehicles that it previously ran off its balance sheet....
Pandit also said at the time that Citigroup plans to move $80 billion worth of marked-down assets on its balance sheet into a held for investment, held to maturity or available for sale category - instead of listing them on their trading portfolio. Pandit said the accounting change "allows us to benefit from the inherent upside from these marked-down assets," but some investors saw the move as a tactic to hide bad assets, Fitzpatrick said...
August 30, 2007
Travelers Paid Lobbyist $120,000
Forbes, Associated Press
WASHINGTON - Insurer Travelers Cos. Inc. paid King & Spalding LLP $120,000 to lobby the federal government in the first half of 2007, according to a disclosure form.
The firm lobbied on insurance issues related to 2005 hurricane claims, according to the form posted online Aug. 13 by the Senate's public records office.
The cost of reinsurance - extra insurance bought by insurers to cover catastrophes - rose after hurricanes Katrina and Rita. The storms also caused the government's National Flood Insurance Program to go about $20 billion into debt.
George Crawford, former chief of staff for Rep. Nancy Pelosi, D-Calif., is among those registered to lobby on behalf of Travelers.
Under a federal law enacted in 1995, lobbyists are required to disclose activities that could influence members of the executive and legislative branches. They must register with Congress within 45 days of being hired or engaging in lobbying....
January 2, 2007
St. Paul Travelers Ends
By Stepher Singer, AP, Forbes
The St. Paul Travelers insurance company has agreed to stop paying "contingent commissions" to brokers and agents to steer business to insurance companies, Connecticut Attorney General Richard Blumenthal said Tuesday.
In August, the St. Paul, Minn.-based company settled a bid-rigging investigation for $77 million in a deal with Connecticut, Illinois and New York. The company agreed to pay restitution and penalties and adopt reforms.
In November, the attorneys general for the three states told St. Paul Travelers and three other major insurance companies that they must end special commissions to agents and brokers by Jan. 1 as agreed to in the earlier settlement.
ACE Group Holdings Inc. of Bermuda, American International Group Inc. (nyse: AIG - news - people ) of New York, Zurich American Insurance Co. Inc. and St. Paul Travelers had agreed to end contingent commissions when 65 percent of an insurance line is sold by companies that don't pay the commissions.
In November, the companies were told that the 65 percent "tipping point" was reached in automobile, homeowners and several other insurance products.
A lawyer for St. Paul Travelers said in a Dec. 30 letter to Blumenthal that as of Monday it would stop paying contingent commissions in several insurance business lines. It will stop paying contingent fees in all insurance lines by Jan. 1, 2008, and will instead use a "purely fixed commission program."
A spokesman for Travelers did not immediately return a call Tuesday.
Blumenthal said he believes the contingent fees will eventually disappear as Travelers and other insurers abandon the practice.
"I expect contingent compensation bans will be contagious in the industry eventually ending a pay-to-play culture altogether, and restoring consumer trust," he said in a statement.
State attorneys general have argued that "contingent commissions" paid to brokers and agents to steer business to insurance companies are tantamount to kickbacks that unfairly increase the prices paid by insurance clients.
December 1, 2006
Travelers to stop insuring
New Orleans businesses
By Rebecca Mowbray, The Times Picayuni
St. Paul Travelers Cos. Inc., Louisiana's largest commercial insurance provider, plans to cancel all of its commercial property policies in the New Orleans area next year, sparking fears that other insurers will follow and slow the region's economic recovery.
While the Saint Paul, Minn., company refused to say how many commercial policies will be affected or specify where the cuts will be in South Louisiana, two insurance brokers who were briefed by the company this week say Travelers will not renew any property insurance for businesses in Orleans, Jefferson, Plaquemines, St. Bernard and eastern St. Tammany parishes. Cuts will also affect individual businesses in other parts of South Louisiana, including St. Charles and St. John parishes.
"I said, 'May I tell anybody who asks that Travelers is withdrawing from the commercial property insurance market in Southeast Lousiana?' " said Anderson Baker, who met with the company on Wednesday as president of the New Orleans agency Gillis, Ellis & Baker. "The answer was, 'Yes.' "
Travelers spokeswoman Jennifer Wislocki said the company has "a high concentration of commercial policies in the hurricane-prone areas of Louisiana" and will not renew many commercial policies when they expire.
"To keep future losses to a more acceptable level for continued financial stability, we are reducing our exposure in some of these areas by non-renewing a number of small- to mid-sized commercial properties," Wislocki said.
Insurance Commissioner Jim Donelon, who was tipped off about Travelers' plans Wednesday night by the Business Council of New Orleans and the River Region, said he was stunned by the news. When he met with Travelers on Thursday, he was equally stunned by the stated reason for the company's retrenchment.
"They cited the state of the rebuilding of our levee system as the primary reason for their decision," Donelon said.
In conjunction with Gov. Kathleen Blanco and Louisiana Department of Natural Resources Secretary Scott Angelle, Donelon quickly convened a summit of commercial property insurers for Tuesday. At the meeting, the trio hopes to advise commercial property writers about the efforts to restore the Louisiana coast and improve the levee system to stave off other defections....
Donelon said that he was puzzled by Travelers' logic, since private insurers don't cover flooding. But insurance companies say that when there is a disaster that includes both wind and flood damage, they end up paying more on claims and facing higher costs in litigation because policyholders who don't have enough flood coverage press harder for money, he said. And unlike storm surge at the beach, which rolls back out to sea, houses in the New Orleans area have the potential to baste in putrid flood water for weeks, as they did after Katrina.
On Monday, Travelers also found that it could face additional legal liability for levee breach flooding when U.S. District Court Judge Stanwood Duval ruled that the flood exclusion language in the policy forms of Travelers and a bunch of other insurance companies was vague, opening the door for the insurers to be held responsible for flood damage. Since insurance companies write the contracts that people sign, lawyers say any finding of ambiguity in an exclusion is generally a win for the policyholder.
Wislocki said there is "no connection at all" between the timing of the court decision and Travelers' decision to not renew commercial property policies.
"We especially disagree with Judge Duval's ruling and intend to appeal it," Wislocki said. "The ruling is inconsistent with many other court rulings that held a flood is a flood whether or not manmade factors are involved. The language in our policies specifically excludes damage from flood water."
Donelon has taken a hard line against other insurance companies that have tried to drop policies because of environmental considerations such as coastal erosion or concerns about levees, such as the homeowners insurance company for teachers, Horace Mann Educators Corp., but Donelon says he has little leverage in the lightly regulated commercial insurance market.
Donelon, commercial insurance agents and business leaders worry that Travelers' retreat will inspire others to follow, deepening a crisis in the limited availability and rising cost of commercial insurance coverage.
"This is sending a shockwave through the business community," said Mark Drennen, president and chief executive officer of Greater New Orleans Inc. "If one company has come to that conclusion, you would anticipate that others would come to that conclusion. Without insurance, we have a calamity. We cannot exist as a business community without insurance."...
The business groups' release says that the Travelers pullout amounts to a loss of $3 billion of commercial property insurance coverage in the New Orleans area, according to the insurance brokers who met with the company.
Wislocki said she couldn't verify that figure. "I don't even know if that's in the ball park," she said.
Marc Eagan, president of Eagan Insurance Agency Inc. in Metairie, said Travelers' pullout is a devastating blow to the region, and worries that other companies will follow in March after a special emergency rule expires that had artificially held insurance coverage in place after Katrina and Rita.
"This is going to be a bloodbath," said Eagan, who added that Hanover Insurance Group, Lafayette Insurance Co and possibly Zurich North America have indicated that they are likely to not renew some commercial policies.
Zurich, the state's third largest provider of commerical multi-peril insurance, said in an e-mailed statement: "Zurich is still open for business in Louisiana. We continue to take on new and renewal business where terms and pricing correspond to the risks, while prudently managing our exposure in coastal areas and our aggregate exposures overall. We don't have any present plans to change this practice."
While surplus lines insurers, companies that are even less regulated than commercial insurers such as Lloyds, are likely to pick up some of the displaced Travelers business, much of the business will likely go to the Louisiana Citizens Property Insurance Corp.
"The Citizens plan is going to be overloaded after March. That is my greatest fear, other than a hurricane coming in 2007," Eagan said.
Citizens traditionally has not done much commercial insurance business. In anticipation of doing more, Citizens plans to raise its coverage limits from $2 million per business building up to $5 million per building. It also is seeking permission from the Louisiana Insurance Rating Commission this month to raise rates by a statewide average of 129.6 percent.
While that rate hike may seem astronomical, it's not as high as the increases that many businesses are reporting from private carriers. Donelon said this week that he is concerned that the state could end up taking on too much commercial insurance liability with inadequate premiums if it's priced wrong.
A wave of commercial policies in Citizens will more quickly add financial exposure than homeowners policies because business properties are usually more expensive than homes, creating additional headaches for the state at a time when many Louisiana lawmakers are already calling to overhaul the state-sponsored insurer of last resort.
Worried about the same thing, Baker said he's flying to Bermuda next week to meet with companies that can provide "excess insurance" - essentially insurance to supplement a commercial policy with a low ceiling - and try to get them to come to Louisiana. "I'm knocking on every door I can," said Baker, a member of Greater New Orleans Inc.'s insurance task force.
Travelers notes that its changes only concern commercial property coverage - liability, workers compensation and other non-property coverage is still in force, and residential policies won't be affected by the commercial pullback.
Wislocki further notes that the company will cancel business on a rolling basis as property policies come up for renewal, so the "non-renewals" should take place over the 12-month period starting in March. "There will be no mid-term cancellations," she said.
Eagan advises business owners to call their insurance brokers to check on the status of coverage for next year - and start hunting for replacements now if there's a hint of bad news.
After receiving high rates of complaints about Travelers, Citizens and Allstate after hurricanes Katrina and Rita, the Louisiana Department of Insurance hired independent contractors to initiate "market conduct" studies of each of the three companies to examine their claims handling and business practices. The reports are expected to be released in February.
Rebecca Mowbray can be reached at firstname.lastname@example.org or at (504) 826-3417.
For more, GO TO > > > Zephyr: Insurance Gone With the Wind?
November 8, 2006
St. Paul Travelers Establishes
Lead Director Role
NEW YORK, (Reuters) - St. Paul Travelers Cos. Inc. (STA.N: Quote, Profile , Research), the fifth-largest writer of commercial auto insurance, said on Wednesday it established the position of lead director of its board and named current independent director John Dasburg to the role.
Dasburg will serve until May 2008, subject to his re-election at the May 2007 annual general meeting. A lead director is required when the chairman and the chief executive are the same person.
The lead director will then be chosen by secret ballot, the company said.
Dasburg is currently chairman, president and chief executive of Miami-based Astar Air Cargo.
September 30, 2006
From The Catbird’s Forum:
Author: Vampire Hunter
Subject: Prudential and Travelers Fraud
The 600 page report on Claude Ballard, Burt Kanter, and Robert Lisle has been posted up. These guys are sleazy!
Thanks for everything. Without your info these guys would slip by into their coffins without doing one thing right in their lives.
Please keep me anonymous. Just post the links if you want...
See also: Prudential: A Nest on Shaky Ground
August 18, 2006
SEC probing GenRe deals
with Pru, St. Paul
Former execs of Berkshire unit questioned by regulator, filing says
By Alistair Barr, MarketWatch
SAN FRANCISCO (MarketWatch) -- The Securities and Exchange Commission is investigating finite reinsurance transactions between Berkshire Hathaway's General Re unit, Prudential Financial and a predecessor of St. Paul Travelers, according to a state insurance regulatory filing made by General Re.
As part of its probe of this controversial type of reinsurance, the SEC questioned Christopher Garand, a former senior vice president of General Re, and Robert McGowan, a former vice president and account executive for the giant reinsurer, the filing with the Connecticut Insurance Department said.
Garand and McGowan invoked their Fifth Amendment rights not to comment during the interviews, General Re said. General Re briefed the SEC on the transactions on June 13, the reinsurer added in its filing.
Richard Spinogatti, Garand's lawyer, confirmed that his client invoked his Fifth Amendment rights during an interview with the SEC about the Prudential and St. Paul transactions, but declined to comment further....
There is no clear definition of finite reinsurance, but generally it's a blend of traditional reinsurance and financing. The products are usually purchased by other insurers looking to protect themselves against the financial risk of future liabilities.
Regulators including New York Attorney General Eliot Spitzer and the SEC have been investigating whether companies used finite reinsurance to manipulate their financial statements.
The probes precipitated the departure of longtime American International Group Chief Executive Maurice "Hank" Greenberg in 2005 and forced AIG to admit to a series of accounting improprieties and restate multiple years of results.
Berkshire and several of its insurance and reinsurance subsidiaries have been dragged into the investigations as regulators scrutinized finite reinsurance they sold to other companies.
Warren Buffett, the billionaire chairman of Berkshire was questioned by regulators in 2005, but only as a witness.
In February, the Department of Justice indicted three former General Re executives over finite reinsurance the company sold to AIG in late 2000 and early 2001. The DOJ alleged that the General Re finite agreements helped AIG cook its books to make investors and regulators think it was in stronger financial shape than it actually was.
Garand was charged by the SEC with securities fraud. Garand and the others pleaded not guilty.
In June 2005, two senior Gen Re executives, John Houldsworth and Richard Napier, each pleaded guilty to conspiracy to falsify SEC filings in connection with the transactions.
August 1, 2006
ST. PAUL TRAVELERS SETTLES
Agreement is Part of Ongoing Effort to Restore
Competition in Insurance Industry
Attorney General Eliot Spitzer and State Insurance Department Superintendent Howard Mills today announced an agreement with one of the country’s largest property casualty insurance companies to resolve charges of customer steering, bid-rigging and improper finite reinsurance transactions.
Connecticut Attorney General Richard Blumenthal and Illinois Attorney General Lisa Madigan also joined in today's settlement.
Under the agreement, St. Paul Travelers, a major provider of automobile and homeowners insurance for individuals and commercial insurance for small businesses, will pay $77 million in restitution and penalties and adopt a series of reforms. In addition, St. Paul Travelers has issued an apology acknowledging its improper conduct.
"St. Paul Travelers has joined the growing number of insurers, brokers and agents who have pledged to make the market for insurance coverage more transparent and competitive,” Spitzer said. “This development will benefit all consumers, from individuals buying car insurance to small businesses to large corporations."
State Insurance Superintendent Howard Mills said: "St. Paul Travelers is now reforming its business so that consumers are given access to more information about their insurance transactions while at the same time compensating policyholders who were economically harmed by their past conduct. Both initiatives are welcome news for all those involved in the property casualty insurance market."
As described in the Assurance of Discontinuance settling this case, the investigation found that St. Paul Travelers made undisclosed payments to insurance brokers and agents in exchange for business referrals, and participated in a scheme to fix insurance prices in the excess casualty area.
For example, the assurance cites an e-mail from a broker at Marsh & McLennan Companies to a St. Paul underwriter seeking a phony bid for an insurance contract that was being steered to one of St. Paul ’s competitors, Zurich:
"Specs were forwarded in November for [Client C]. Zurich’s renewal quote is $175,000 for [the lead excess layer]. Primary AL is $2MM. Josh is asking for non-quotes. If you didn’t already respond to [the Marsh executive] . . ., please feel free either to decline for class or quote higher (please)."
The next day St. Paul responded by issuing a quote 30 percent higher than Zurich’s bid.
The assurance also details St. Paul’s use of improper "finite reinsurance" to bolster both its own financial results and those of its clients. For example, in the years 1999 through 2002, St. Paul entered into aggregate excess of loss reinsurance contracts with an insurer in Barbados, despite a side agreement that any losses suffered by the insurer would be made up by St. Paul.
In a statement today, St. Paul Travelers apologized for its actions, saying: “St. Paul Travelers acknowledges that certain of its employees violated acceptable business practices and St. Paul Travelers’ own standards of conduct by engaging in improper bidding practices and certain “finite insurance” activities. St. Paul Travelers apologizes and has enacted business practice reforms to ensure that these incidents do not occur again. Further, St. Paul Travelers has agreed to support legislation eliminating contingent compensation for brokers and agents.”
Under today's agreement, $37 million will be paid to St. Paul Travelers policyholders harmed by the company’s bid-rigging activities. In addition, St. Paul Travelers will pay penalties of $24 million to New York and $8 million each to Connecticut and Illinois.
In the fall of 2004, the New York Attorney General's office and the New York Insurance Department announced a joint probe of misconduct in the insurance industry. This investigation has resulted to date in guilty pleas from 20 insurance company executives and officers, and the recovery of approximately $3 billion for consumers and workers compensation plans.
The investigation underlying today's Assurance of Discontinuance was conducted by Assistant Attorneys General Maria Filipakis, Matthew Gaul, and Mel Goldberg under the direction of David D. Brown IV, Chief of the Attorney General’s Investment Protection Bureau.
Susan Donnellan, a Deputy Superintendent and General Counsel of the New York State Department of Insurance, led the Insurance Department’s investigation.
~ ~ ~
See also: Confessions of a Whistleblower; Marsh & McLennan: The Marsh Birds; More Claims by Harmon: The St. Paul Travelers; New Songs by The Whistler; RICO in Paradise
June 5, 2006
Travelers faces bad-faith suit over Katrina claim payment
By JUDY GREENWALD, Business Insurance
NEW ORLEANS-Travelers Property & Casualty Co. and several of its employees are facing a bad-faith lawsuit over the insurer's alleged refusal to pay in full claims stemming from damage sustained by a New Orleans hospital during Hurricane Katrina.
The May 23 lawsuit, which was filed in U.S. District Court in New Orleans, seeks $28.7 million from Travelers, a unit of St. Paul, Minn.-based St. Paul Travelers Cos. Inc....
January 8, 2005
ST. PAUL LINKED
TO MARSH FRAUDS
By Diane Levick, The Hartford Courant
The St. Paul Cos. - now part of The St. Paul Travelers Cos. - was among the insurers that benefited from alleged bid-rigging by broker Marsh Inc., the New York attorney general’s office said.
A court document released Thursday on the guilty plea of a Marsh senior vice president draws St. Paul Travelers into the controversy, but does not make clear whether the insurer intentionally participated in any wrongdoing....
Robert Stearns, an executive in Marsh’s excess casualty business, pleaded guilty in a New York court Thursday to the felony of scheming to defraud in the first degree. It was the sixth guilty plea in a far-reaching probe of the insurance industry by New York Attorney General Eliot Spitzer.
Stearns asked various insurers to submit bids that were less favorable than others, so Marsh could steer business to maximize its profits and protect incumbent insurers on certain accounts that were up for renewal, the felony complaint says.
The sham bids were sometimes called “B Quotes” or simply “B”.
In one example in March 2003, Stearns asked a Marsh broker in an e-mail to get a B quote from insurer Zurich on an account that would be renewing insurance with St. Paul, the complaint says. Stearns suggested “325,000 should work” because St. Paul’s price was $270,000, the complaint says.
Later that day, Stearns repeated the request, and the next day, a Zurich underwriter provided a $360,000 quote to Marsh, the document says.
In another March 2003 example, Stearns was asked by another Marsh executive to get B quotes on an account that was up for renewal with American International Group. “Further e-mails reflect that Zurich, ACE, and St. Paul subsequently offered losing quotes on this account,” the complaint states.
The document does not say whether St. Paul knew its quote for the account would be used in bid-rigging.
However, a Marsh broker’s e-mail that was cited in the document strongly implies he considered the B quotes laughable, as the broker told an ACE underwriter: “need a B for [expletive] and giggles.”
The client renewed insurance with American International Group.
St. Paul Travelers was not named in Spitzer’s bid-rigging lawsuit against Marsh in October, though the suit implicated several insurers including The Hartford Financial Services Group Inc. without naming them defendants.
However, Spitzer’s office has subpoenaed information from St. Paul and dozens of other companies.
Meanwhile Friday, Spitzer said he expects the guilty pleas he has gotten so far will lead to more charges.
“We are laying the foundation with these criminal cases that permit us to make criminal cases and bring criminal actions against those more senior within the companies,” Spitzer said after a state assemble hearing in New York, according to Bloomberg News.
In addition to Stearns, guilty pleas have come from two executives at AIG, two from Zurich American Insurance Co. and one from ACE.
In another development, Marsh & McLennan Cos. Inc. said Friday it has named E. Scott Gilbert to the new post of senior vice president and chief compliance officer effective Jan. 24. He was chief compliance counsel for the General Electric Co.
For more, GO TO > > > Claims By Harmon; Claims By Harmon: The St. Paul Travelers
December 10, 2004
St. Paul Travelers Receives Subpoena Relating to Lawyers’ Professional Liability Insurance
St. Paul Travelers News Release
SAINT PAUL, Minn. - The St. Paul Travelers Companies, Inc. (NYSE: STA) today announced that, as part of an industry-wide inquiry, the company has received a subpoena from the Office of the Attorney General of the State of New York seeking information relating to the underwriting of lawyers’ professional liability insurance. The company may receive similar requests for information from other government or regulatory authorities and will cooperate fully with all such requests.
St. Paul Travelers is a leading provider of insurance and asset management services. For more information, visit www.stpaultravelers.com
(Catbird Note: And for more information on some possible reasons why St. Paul Travelers and other providers of Lawyers Professional Liability Insurance are being investigated, GO TO > > > Claims By Harmon)
< FLASHBACK ONE YEAR >
December 1, 2003
Travelers, St. Paul Announce
By Andrea Ortega-Wells, Insurance Journal
In the wake of the “Terminator” taking the helm as California’s new governor, Travelers Property Casualty Corp. and The St. Paul Companies Inc. announced plans to merge, forming the nation’s second largest commercial lines insurance company. The combined company, to be called The St. Paul Travelers Companies, will be second only to American International Group in the commercial lines market, and second to Progressive for agency-distributed personal lines products. Overall, the merger will create the number one agency-based insurer in the nation, according to A.M. Best rankings.
The two industry giants touted the deal as a “merger of equals.” The board of directors of both companies agreed to the tax-free, stock-for-stock merger valued at $16.4 billion. The St. Paul Travelers Companies expects to have total assets of $107 billion, and combines net written premiums of $20 billion.
The transaction is subject to approvals, but is expected to close in the second quarter of 2004.
“This transaction brings together two companies with similar performance-based cultures and highly complementary product offerings and geographic reach,” said Robert Lipp, chairman and CEO of Travelers.
Jay S. Fishman, 51, chairman and CEO of The St. Paul, will serve as chief executive officer of the combined company. Lipp, 65, will serve as the new company’s executive chairman until Jan. 1, 2006, at which time it is anticipated that Fishman will become chairman as well as chief executive officer.
St. Paul Travelers will hold its corporate headquarters in Saint Paul, Minn. The special lines division, which includes Gulf Insurance Group, will be known as St. Paul Specialty, and will be based in Saint Paul as well. The St. Paul’s international business will continue to be based in London. The company’s commercial lines and personal lines business will be consolidated under the Travelers brand and based in Hartford, Conn.
Inevitably, operational downsizing is just around the corner, but both Fishman and Lipp stated that they do not know the extent of consolidation efforts. Travelers’ workforce consists of 20,000 employees, while St. Paul employs another 10,000.
“Obviously there will be consolidation opportunities,” said Joseph Anotti, vice president of public affairs for the National Association of Independent Insurers. “You don’t need two back rooms; whether it’s immediate or if it happens six months or a year later, that’s one of the things you want to get out of a merger.”
But with reinsurance costs on the rise, investment incomes on the decline and enormous claims costs hampering the bottom line, perhaps St. Paul Travelers deal will launch the next wave merger frenzy....
The announcement came as a complete surprise even though Lipp and Fishman said discussions have been underway since June 2003.
“It happened so quickly, no one knew about it including Travelers’ employees that we talked to,” said Scott Hauge, president of CAL Insurance & Associates, an independent agency located in San Francisco, Calif....
Hauge, whose agency writes about $2 million in premium through Travelers, foresees possible benefits to agents, but is also concerned about a change in company strategies. “When you have two companies of this size merge together, you have to wonder, what is going to be their marketing strategy in the future? Will they be working with only larger agents?”...
“With all the mergers and acquisitions, it makes it really difficult to plan,” Hauge said. “Who knows whether that company is going to be taken over or what’s going to happen.”....
December 24, 2003
FTC Grants Early End to
St. Paul/Travelers Merger Review
The St. Paul Companies and Travelers Property Casualty Corp. announced that the Federal Trade Commission has granted early termination of the waiting period required by the Hart-Scott-Rodino Antitrust Improvements Act in connection with the proposed merger between Travelers and The St. Paul.
The merger, announced in November, is expected to close in the second quarter of 2004, pending receipt of additional regulatory and shareholder approvals.
September 29, 2004
The Pomerantz Firm Charges The St. Paul Travelers Companies With Securities Fraud
Press Release - Yahoo! Finance
NEW YORK (PRIMEZONE) - Pomerantz Haudek Block Grossman & Gross LLP (www.pomerantzlaw.com) has filed a class action lawsuit in the United States District Court for the District of Minnesota on behalf of former shareholders of Travelers Property Casualty Corp (“Travelers”) Class A and Class B common stock who exchanged their shares in Travelers for shares of the St. Paul Travelers Companies, Inc. (“St. Paul”) common stock pursuant to the April 1, 2004 merger of St. Paul and Travelers.
The lawsuit was filed against Travelers, the St. Paul Companies, Inc., St. Paul Travelers and their top executives, CEO Jay Fishman and CFO Jay Benet; St. Paul’s former CFO Thomas Bradley; and Travelers’ former CEO, Robert Lipps.
According to the Complaint, it is alleged that both St. Paul and Travelers failed to disclose that St. Paul utilized a markedly different method for calculating insurance reserves than that utilized by Travelers and that applying Travelers’ methodology, as was required, would result in the necessity of having to increase reserves on St. Paul’s insurance policies by over $1 billion – approximately 12 percent of the value of St. Paul as determined by the merger consideration....
Andrew G. Tolan, Esq.
Pomerantz Haudek Block Grossman & Gross LLP
Phone: (888) 476-6529
October 6, 2004
Class Action Lawsuit Commenced Against St. Paul Travelers Companies by Bernstein Liebhard & Lifshitz, LLP
Press Release, Yahoo! Finance
NEW YORK, NY - (MARKET WIRE) - A securities class action lawsuit was commenced on behalf of former shareholders of Travelers Property Casualty Corp. (“Travelers”) Class A and Class B common stock who exchanged their shares in Travelers for shares of the St. Paul Travelers Companies, Inc. (“St. Paul”) ... common stock pursuant to the April 1, 2004 merger of St. Paul and Travelers.
A copy of the Complaint is available from the Court or from Bernstein Liebhard & Lifshtz, LLP. Please visit our website at www.bernlieb.com or contact us at (800) 217-1522 or by email at STA@bernlieb.com.
The case is pending in the United States District Court for the District of Minnesota, against Defendants St. Paul Travelers Companies, Inc. f/n/a the St. Paul Companies, Inc., Jay S. Fishman, Thomas A. Bradley, John C. Treacy, Carolyn H. Byrd, John H. Dasburg, Janet Dolan, Kenneth M. Duberstein, Lawrence G. Graev, Thomas R. Hodgson, William H. Kling, James A. Lawrence, John A. Maccoll, Glen D. Nelson, and Gordon M. Sprenger.
The Complaint charges that St. Paul and certain officers and directors violated the Securities Act of 1933, by issuing material misrepresentations to the market in connection with the April 1, 2004 merger. Specifically, defendants failed to disclose and/or misrepresented the following adverse facts, among others: St. Paul utilized a markedly different method for calculating insurance reserves than that utilized by Travelers and that applying Travelers’ methodology, as was required, would result in the necessity of having to increase reserves on St. Paul’s insurance policies by over $1 billion – approximately 12% of the value of St. Paul as determined by the merger consideration.
On June 17, 2004, news regarding this issue began to trickle out to shareholders, and St. Paul stock began to decline, falling from $41.10 on that date to $35.66 on July 23, 2004, the date that the exact size of the needed reserve adjustment - $1.6 billion - was first announced. Then on August 5, 2004, following the announcement that St. Paul reported a net loss for the second quarter ended June 30, 2004 of $275 million, or $0.42 per basic and diluted share, compared to net income of $441 million or $1.02 per basic share and $1.01 per diluted share in the prior year quarter, the price of St. Paul common stock closed at $34.75, representing a 14.77% decline from it’s price on August 1, 2004.
Plaintiff seeks to recover damages on behalf of all those who purchased or otherwise acquired St. Paul securities pursuant to the April 1, 2004 merger....
From Yahoo! Finance, October 10, 2004:
The St. Paul Travelers Companies Inc (STA)
TOP INSIDER & RULE 144 HOLDERS
LIPP, ROBERT I. 406,455
FISHMAN, JAY S. 186,921
BAILKIN, KENNETH J. 61,505
ETTINGER, IRWIN 51,886
CLARKE, CHARLES J. 45,625
TOP INSTITUTIONAL HOLDERS
Holder Shares Value
Citigroup Inc. 58,394,011 $2,367,293,170
Wellington Management Company 32,433,460 $1,314,852,448
Capital Research and Management 29,749,000 $1,206,024,441
FMR Corporation 25,267,333 $1,024,337,664
Dodge & Cox Inc 24,420,199 $ 989,994,852
Axa 23,389,704 $ 948,218,585
State Street Corporation 22,539,042 $ 913,732,748
Barclays Bank Plc 21,783,469 $ 883,101,819
Price (T. Rowe) Associates 15,153,664 $ 614,329,529
Vanguard Group, Inc. 13,486,792 $ 546,754,539
Catbird Note: One of the top ten Mutual Fund Holders is shown as Putnam Fund For Growth And Income, with 3,949,029 shares valued at $160,607,014. For more, GO TO > > > The Putnam Fund; Marsh & McLennan: The Marsh Birds
August 18, 2004
St. Paul Travelers Gets Okay For Asbestos Settlement
By Arthur D. Postal, National Underwriter
A New York bankruptcy judge has approved an agreement by St. Paul Travelers to pay $502.5 million to end a group of lawsuits that claimed the insurer used illegal practices to delay settling workplace asbestos injury claims.
The settlement, which was tentatively agreed to in November of last year, was approved by Judge Burton R. Lifland of U.S. Bankruptcy Court in Manhattan.
The suits alleged that Travelers violated state insurance unfair claim and trade practice laws while processing the claims.
The West Virginia lawsuit involved in the settlement alleged that insurers had acted “maliciously,” using “fraud, deceit and outright lies,” designing and orchestrating their claims settlement practices to “intentionally delay,” and raising defenses that they knew would never succeed in order to settle claims for less money....
According to St. Paul Travelers, the settlement ends all asbestos-related claims in Hawaii and “bars all future asbestos-related statutory direct actions against Travelers in West Virginia, Massachusetts and other states in which Travelers believes plaintiffs might try to bring such actions.”
Specifically, the settlement calls for St. Paul Travelers to pay $445 million to settle the claims and an additional $57.5 million to pay legal fees.
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Last updated June 18, 2009, by The Catbird
October 10, 2004: Originally posted on www.the-catbird-seat.net.
March 13, 2007: The U.S. Dept of Justice obtains Order from Judge David A. Ezra to shut down website.
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