The St. Paul Companies, Inc.

 

Filed by The St. Paul Companies, Inc. Pursuant to Rule 425 Under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 under the Securities Exchange Act of 1934
   
Subject Company: Travelers Property Casualty Corp.
   
Commission File No.: 333-111072

 

     This filing contains certain forward-looking information about Travelers Property Casualty Corp. (“Travelers”), The St. Paul Companies, Inc. (“The St. Paul”) and the combined company after completion of the transactions that are intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. Words such as “expect”, “feel”, “believe”, “will”, “may”, “anticipate”, “plan”, “estimate”, “intend”, “should” and similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to, financial projections and estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to future operations, products and services; and statements regarding future performance. Such statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of Travelers and The St. Paul, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements.

     Some other risks and uncertainties include, but are not limited to: those discussed and identified in public filings with the Securities and Exchange Commission (the “SEC”) made by Travelers and The St. Paul; the inability to obtain price increases due to competition or otherwise; losses due to foreign currency exchange rate fluctuations and losses in investment portfolios, which could be adversely impacted by adverse developments in U.S. and global financial markets, interest rates and rates of inflation; weakening U.S. and global economic conditions; insufficiency of, or changes in, loss reserves; the occurrence of catastrophic events, both natural and man-made, including terrorist acts, with a severity or frequency exceeding our expectations; exposure to, and adverse developments involving, environmental claims and related litigation; the impact of claims related to exposure to potentially harmful products or substances, including, but not limited to, lead paint, silica and other potentially harmful substances; adverse changes in loss cost trends, including inflationary pressures in medical costs and auto and home repair costs; developments relating to coverage and liability for mold claims; the effects of corporate bankruptcies on surety bond claims; adverse developments in the cost, availability and/or ability to collect reinsurance; the ability of our subsidiaries to pay dividends to us; adverse outcomes in legal proceedings; judicial expansion of policy coverage and the impact of new theories of liability; the impact of legislative actions, including federal and state legislation related to asbestos liability reform; larger than expected assessments for guaranty funds and mandatory pooling arrangements; a downgrade in claims-paying and financial strength ratings; the loss or significant restriction on the ability to use credit scoring in the pricing and underwriting of policies; amendments and changes to the risk-based capital requirements; the ability to achieve the cost savings and synergies contemplated by the proposed merger; the effect of regulatory conditions, if any, imposed by regulatory agencies; the reaction of Travelers’ and The St. Paul’s customers and policyholders to the transaction; the ability to promptly and effectively integrate the businesses of Travelers and The St. Paul; and diversion of management time on merger-related issues.

     Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. Neither Travelers nor The St. Paul undertakes any obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers are also urged to carefully review and consider the various disclosures in Travelers’ and The St. Paul’s various SEC





reports, including but not limited to Annual Reports on Form 10-K for the year ended December 31, 2002 and Quarterly Reports on Form 10-Q for the reporting periods of 2003.

     This filing may be deemed to be solicitation material in respect of the proposed merger of Travelers and The St. Paul. On December 10, 2003, The St. Paul filed with the SEC a registration statement on Form S-4, including the preliminary joint proxy statement/prospectus constituting a part thereof. SHAREHOLDERS OF TRAVELERS AND SHAREHOLDERS OF THE ST. PAUL ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED OR THAT WILL BE FILED WITH THE SEC, INCLUDING THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS THAT WILL BE PART OF THE DEFINITIVE REGISTRATION STATEMENT, AS THEY BECOME AVAILABLE BECAUSE THEY CONTAIN, OR WILL CONTAIN, IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. The final joint proxy statement/prospectus will be mailed to shareholders of Travelers and shareholders of The St. Paul. Investors and security holders will be able to obtain the documents free of charge at the SEC's website, www.sec.gov, from Travelers Property Casualty Corp., One Tower Square, Hartford, Connecticut 06183, Attention: Investor Relations, or from The St. Paul Companies, Inc., 385 Washington Street, Saint Paul, Minnesota 55102, Attention: Investor Relations.

     Travelers, The St. Paul and their respective directors and executive officers and other members of management and employees may be deemed to participate in the solicitation of proxies in respect of the proposed transactions. Information regarding Travelers’ directors and executive officers is available in Travelers’ proxy statement for its 2003 annual meeting of shareholders, which was filed with the SEC on March 17, 2003, and information regarding The St. Paul’s directors and executive officers is available in The St. Paul’s proxy statement for its 2003 annual meeting of shareholders, which was filed on March 28, 2003, as supplemented by the Additional Materials filed pursuant to Schedule 14A of the Securities Exchange Act of 1934, as amended, on April 7, 2003. Additional information regarding the interests of such potential participants will be included in the joint proxy statement/prospectus and the other relevant documents filed with the SEC as they become available.

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     The attached slide presentation may be used by The St. Paul as additional solicitation material in connection with the proposed transaction and supplements the slide presentation that was filed by The St. Paul on November 17, 2003.

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The St. Paul Travelers
Companies

 

Setting the Property/Casualty
Market Standard

   

 

 

 





Cautionary Statement

 

Any comments made regarding future expectations, trends and market conditions, including pricing and loss cost trends as well as other topics, may be considered forward-looking under the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that could cause actual results to differ from our current expectations. The St. Paul Companies and Travelers assume no duty to update forward looking statements. Factors that could cause actual results to differ are described under “Cautionary Statement regarding Forward—Looking Statements” in St. Paul’s registration statement on Form S-4, filed with the SEC.

 

1




The St. Paul Travelers Companies
Setting The Property/Casualty Market Standard

Ø The “Go-To” National Market Company
   
Ø Financial Strength
   
Ø Compatible Cultures and Track Record of Successful Transactions
   
Ø Paramount Objective —Driving Value Creation for Shareholders
   
Ø Management Appointments and Integration Planning

 

2

The St. Paul Travelers Companies
Summary of Merger Terms

 

 Exchange Ratio   0.4334 St. Paul shares per Travelers share (Class A and B)
     
 Structure   Tax-free merger
     
 Dividend Policy    Ongoing dividend at the annual rate of $0.88 per share;
  Special cash dividend to SPC shareholders of record date prior to closing
     
 New Corporate Name   The St. Paul Travelers Companies
     
 Global Headquarters   Saint Paul, Minnesota
     
 Management    Robert Lipp, Chairman
  Jay Fishman, CEO (Chairman, 1/1/06)
     
 Board Composition    12 Travelers Directors
  11 St. Paul Directors
 
 Expected Closing   Second quarter 2004
 
 Approvals Required   Normal regulatory and shareholder approvals for both companies
 

 

 

3





 

The “Go-To”
National Market Company

 

 

 





The St. Paul Travelers Companies
Total Net Premiums Written

($ in billions)

 

     
2003 Estimated
     
     
St. Paul
  
Travelers
  
Combined
     
 
 
                           
General Commercial Lines       3.0       6.2       9.2  
                           
Specialty Commercial Lines       4.5       1.9       6.4  
     
 
 
Total Commercial Lines       7.5       8.1       15.6  
                           
Personal Lines       —       5.0       5.0  
     
 
 
Total Company NPW       $7.5       $13.1       $20.6  
                           

 

 

5

Source: Management estimates.

The St. Paul Travelers Companies Market Share

 

 Commercial Lines   Personal Lines – Agency Only  
 
1 AIG 8.8%   1 Progressive 13.1%
             
2 St. Paul Travelers 7.6%   2 St. Paul Travelers 6.8%
             
2 Zurich/Farmers 6.5%   3 Hartford 4.7%
             
3 Travelers 4.4%   4 SAFECO 4.4%
             
4 CNA 3.8%   5 Erie Ins Group 3.4%
             
5 Liberty Mutual 3.7%   6 Mercury General 2.7%
             
6 St. Paul 3.2%   7 CNA 2.7%
             
7 Chubb 3.1%   8 Chubb 2.6%
             
8 Hartford 2.9%   9 Auto-Owner Ins 2.6%
             
9 CA Comp Fund 2.7%   10 Allmerica 2.4%
             
10 ACE 2.3%        

 

 

Source: A.M. Best. Based on 2002 direct premium written, excluding other accident & health.

6





The St. Paul Travelers Companies
Commercial Lines Ranking by Product

  St. Paul Travelers Combined  
 
 
Commercial Auto Liability   4     3     1    
       		        
Commercial Multi-Peril   12     2     1    
       		        
Commercial P&C   6     3     2    
       		        
Fidelity and Surety   2     1     1    
       		        
Fire   8     4     4    
       		        
Other Liability   4     7     2    
       		        
Worker’s Comp   10     5     4    
 

 

 

Source: A.M. Best.

7





The St. Paul Travelers Companies
Commercial Lines Geographic Penetration

 

 

St. Paul Travelers Combined   Geographic Diversification
 
     
 
     

 

 

Source: A.M. Best. Based on 2002 direct premiums written. The following A.M. Best lines of business are included in the definition of "Commercial Lines" as shown in the chart: Fire, Allied Lines, Ocean Marine, Inland Marine, Earthquake, Workers' Compensation, Other Liability, Products Liability, Burglary & Theft, Boiler & Machinery, Commercial Multi-Peril (Liability & Non-Liability), Commercial Auto Liability, Commercial Auto, Physical 8 Damage, and Commercial Auto No-Fault.
(1) Includes District of Columbia.

8





The St. Paul Travelers Companies
Geographic Penetration

Geographic Combination

     
 
     
 

 

 

____________________
Source: OneSource U.S. Insurance P&C Database: Schedule T.

9





The St. Paul Travelers Companies
Geographic Penetration

 

Geographic Combination

     
     
 
     
 

 

10





The St. Paul Travelers Companies
The “Go-To” Company for Independent Agents

 

Commercial Lines Agency Preference   Personal Lines Agency Preference
 
 
     

 

Goldman Sachs Survey, August 18, 2003. Source:

11





The St. Paul Travelers Companies
The “Go-To” Company for Independent Agents

12

Note: excludes Marsh, Aon, and Willis. Excludes National Accounts, Discover, Gulf, Northland, American Equity, and Associates




The St. Paul Travelers Companies
The “Go-To” Company for Independent Agents


Travelers Top 100 Agents



St. Paul Top 100 Agents

 

Less than 50 percent overlap



13


The St. Paul Travelers Companies
The “Go-To” Company for Independent Agents


An Initial Perspective on Agency Concentration – Top 30 B.I. (1)

    St. Paul Travelers Rank
(number of brokers)
Combined
Market
Share		 Number of
Brokers
Included		 #1 #2 #3 #4
18% - 21% 1 1      
15% - 18% 3 1 2    
12% - 15% 3 1 2    
10% - 12% 0        
8% - 10% 2 1 1    
6% - 8% 3 1 1 1  
4% - 6% 1 1      
2% - 4% 2     1 1
<2% 0        


Source: Agent survey.

(1) Excludes Marsh, Aon and Willis.

14






Financial Strength







The St. Paul Travelers Companies
Second Largest U.S. Insurer by Shareholders’ Equity


($ in billions)

Rank
Company Name
Common
Shareholders’
Equity
1 American International Group $68.2 
2 St. Paul Travelers Companies(1) 20.2 
2 Allstate 19.4 
3 Travelers 11.5 
4 Hartford 11.3 
5 Chubb Corporation 8.5 
6 ACE Limited 8.3 
7 CNA Financial Corporation 7.5 
8 XL Capital Limited 7.4 
9 St. Paul 6.3 
10 Cincinnati Financial 5.8 
11 SAFECO Corporation 4.9 
12 Progressive Corporation 4.6 


Source: Company filings.
Note: Statistics as of September 30, 2003.
(1) Reflects pro forma purchase accounting adjustments. See Form S-4 filed December 10, 2003.

16


The St. Paul Travelers Companies
Summary Financial Information

($ IN BILLIONS, except per share amounts)                  
                   
2003 Estimated (First Call)
  St. Paul
    Travelers
       
Revenues $    8.1   $ 14.9        
Operating income   0.8     1.7        
                   
At September 30, 2003
              Pro Forma
(1)
Investment assets   22.7     37.8     60.8  
Total assets   40.4     63.5     109.1  
Shareholders’ equity   6.3     11.5     20.2  
Book Value Per Share               30.19  
Statutory Surplus                13.0  
NPW / Surplus               1.48 x
 Reserves / Surplus               2.62 x
                   
                   

Source: Company filings.
(1) Reflects pro forma purchase accounting adjustments. See Form S-4 filed December 10, 2003.

17


The St. Paul Travelers Companies
Strong Capital Base


($ in billions)
                  
                   
Leverage
  St. Paul
    Travelers
    Pro Forma
(1)
Conventional Debt (2)   $2.2     $2.7     $5.0  
Total Debt   3.6     2.7     6.4  
Total Capital   9.8     14.2     26.6  
Conventional Debt (2) / Capital   22.7 %   18.9 %   19.0 %
                   
Financial Strength Ratings (as of November 14, 2003)
       
                   
Moody’s   A1     Aa3        
                   
S&P   A+     AA-        
                   
A.M. Best   A     A++        
                   
Fitch   NR     AA        

Source: Company filings.
Note: Financial statistics as of September 30, 2003, except as noted.
(1) Reflects pro forma purchase accounting adjustments. See Form S-4 filed December 10, 2003.
(2) Excludes mandatory convertibles and hybrid securities.

18


The St. Paul Travelers Companies
Investment Portfolio


 







Compatible Cultures and Track
Record of Successful Transactions








The St. Paul Travelers Companies
Highly Compatible Cultures


» Both companies pursuing similar business strategies – an emphasis on independent agents and brokers

» Focus on underwriting, claims and actuarial disciplines

» Expense control – spend it like it’s your own

» Commitment to performance measurement and accountability at every level

» Profitability is more important than market share

21


The St. Paul Travelers Companies
Strong Combined Team Dedicated to Value Creation


» Proven experience in integrating businesses

  • Primerica / Travelers (1993)

  • Travelers / Aetna P&C (1995)

  • St. Paul / USF&G (1998)

  • Travelers / Citicorp (1999)

  • Reliance Surety (2000)

  • RSA Financial Professional renewal rights (2002)

  • Kemper renewal rights (2003)

  • RSA renewal rights (2003)

  • Atlantic Mutual renewal rights (2003)


22








Paramount Objective – Driving
Value Creation for Shareholders








The St. Paul Travelers Companies
Estimated Financial Impact


($ in millions)

Travelers 2004 First Call net operating income estimates (1)   $2,035
St. Paul 2004 First Call net operating income estimates (1)   1,052
   
Combined 2004 First Call net operating income estimate(1)   $3,087
     
     
Estimated Annualized  After-tax Adjustments (2)    
   
Purchase GAAP adjustment(3)   ($260) - ($220)
Expense savings   88 - 228
Revenue synergies   110 - 160
     
     
     


Note: For illustrative purposes.
(1) Estimates based on First Call consensus for Travelers and St. Paul; assumed to be based on a fully diluted share base. Combined reflects addition of Travelers and St. Paul estimates, without adjustment.
(2) Reflective of phase-in period.
(3) See Form S-4 filed December 10, 2003.

24


The St. Paul Travelers Companies
Significant Cost Savings


» Initial expected realized cost savings of $228 million after-tax projected by 2006
 

 

 
» Projected to be 7-9% of controllable expenses
 

 

 
» Restructuring charge at the time of closing – initial estimate $300 - $400 million

Note: Assumes closing on June 30, 2004.

25








Management Appointments and Integration Planning








Management Announcements on November 17


Robert Lipp Chairman
Jay Fishman Chief Executive Officer
Charles Clarke Vice Chairman
John MacColl Vice Chairman & General Counsel
Douglas Elliot CEO, General Commercial & Personal Lines
T. Michael Miller CEO, Specialty Commercial
William Heyman EVP, Chief Investment Officer
Brian MacLean EVP, Claim
Timothy Yessman EVP, Claim
Marita Zuritas EVP, Merger Integration & Operational Strategy
Tim Schwertfeger Chairman & CEO, Nuveen Investments


27


Management Announcements on December 2


Jay Benet EVP & Chief Financial Officer
Andy Bessette EVP & Chief Administrative Officer
William Bloom SVP & Chief Information Officer
Thomas Bradley Financial Related Activities & Financial Reporting
John Clifford SVP, Human Resources
Irwin Ettinger Vice Chairman
Samuel Liss EVP, Strategic Development
Jim Michener Senior Legal Officer for the combined insurance operations
Mario Olivo EVP, Financial Planning & Analysis and Investor Relations
Kent Urness Chief Executive Officer, International
Michael Connly SVP, Information Technology
Diane Bengston Senior HR Officer for General Commercial and Personal Lines
Stewart Morrison Investments
Laura Gagnon Investor Relations


28


General Commercial and Personal Lines
Management Announcements on December 16


John Albano National Accounts
Dennis Crosby Middle Market
Pete Higgins Middle Market
Larry Illion Small Commercial
Marc Schmittlein Small Commercial
Joe Lacher Personal Lines
Scott Belden Ceded Reinsurance



29


Specialty Commercial
Management Announcements on December 16


Bill Cunningham Construction
Rich DeSimone Global Marine
Geo Estes Discover Re
Bob Fellows Canadian Operations
Rick Gustafson Oil & Gas
Peter Hayden Ireland Operations
Martin Hudson UK Operations and Lloyd’s Operations
John Kearns Financial & Professional Services
Michael Klein Public Sector
Chris Longo Specialty Excess and Umbrella
Kae Lovaas Public Sector & Strategic Initiatives
Kevin Nish CAT Risk
Bill Rohde Technology
Rick Smith Foreign Risk Services and Global Accounts
Doreen Spadorcia Surety/Bond
Kevin Rehnberg SVP, Specialty Commercial
Kent Urness EVP, Specialty Commercial
Greg Vezzosi SVP, Specialty Commercial
Chris Watson Gulf


30


The St. Paul Travelers Integration Planning Process


» Organizational dimensions

  • All U.S. and Canadian insurance underwriting field structures

  • Corporate staff

  • Claim infrastructure and organization

  • Home office underwriting support

  • Systems infrastructure and organization

  • Subsidiary operations

  • Run-off operations

» Tactical as well as operational focus

» Financial integration


» Integration planning to be completed at closing. Integration expected to be completed in 18-24 months, including movement to end state systems


31


The St. Paul Travelers Planning Process
Team Structure




32


The St. Paul Travelers Companies
Setting the Property/Casualty Market Standard


» The “Go-To” National Market Company
   
» Financial Strength
   
» Compatible Cultures and Track Record of Successful Transactions
   
» Paramount Objective Driving Value Creation



33


This filing may be deemed to be solicitation material in respect of the proposed merger of Travelers and The St. Paul. In connection with the proposed transaction, a registration statement on Form S-4 has been filed with the SEC. SHAREHOLDERS OF TRAVELERS AND SHAREHOLDERS OF THE ST. PAUL ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE JOINT PROXY STATEMENT/PROSPECTUS THAT IS PART OF THE REGISTRATION STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. The final joint proxy statement/prospectus will be mailed to shareholders of Travelers and shareholders of The St. Paul. Investors and security holders will be able to obtain the documents free of charge at the SEC’s website, www.sec.gov, from Travelers Property Casualty Corp., One Tower Square, Hartford, Connecticut 06183, Attention: Investor Relations, or from The St. Paul Companies, Inc., 385 Washington Street, Saint Paul, Minnesota 55102, Attention: Investor Relations.

Travelers, The St. Paul and their respective directors and executive officers and other members of management and employees may be deemed to participate in the solicitation of proxies in respect of the proposed transactions. Information regarding Travelers’ directors and executive officers is available in Travelers’ proxy statement for its 2003 annual meeting of shareholders, which was filed with the SEC on March 17, 2003, and information regarding The St. Paul’s directors and executive officers is available in The St. Paul’s proxy statement for its 2003 annual meeting of shareholders, which was filed on March 28, 2003, as supplemented by the Additional Materials filed pursuant to Schedule 14A of the Securities Exchange Act of 1934, as amended, on April 7, 2003. Additional information regarding the interests of such potential participants is included in the joint proxy statement/prospectus and the other relevant documents filed with the SEC when they become available.





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    The attached fact sheet may be used by The St. Paul as additional solicitation material in connection with the proposed transaction and supplements the fact sheet that was filed by The St. Paul on November 17, 2003.

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THE ST. PAUL TRAVELERS COMPANIES, INC.

Second Largest Commercial Insurer in the United States

     The combined company and its shareholders, employees, agents, and customers should benefit from:

     With 2002 direct written premiums of $20B, The St. Paul Travelers Companies will be:

*based on AM Best Rankings

     The St. Paul Companies

     Travelers Property Casualty





 

2003 Projected Net Written Premium by Business Unit
  ($ in billions)
                 
                   
  St. Paul
Companies		     Travelers   Combined  
   
   
   
 
                   
 General Commercial Lines:                  
            National $ 0.3   $ 0.8   $ 1.1  
            Middle market   1.7     3.3     5.0  
            Small commercial   1.0     2.1     3.1  
   
   
   
 
   Total General Commercial $ 3.0   $ 6.2   $ 9.2  
   Specialty Commercial Lines:                  
         Construction $ 0.8   $ 0.5   $ 1.3  
            Surety   0.5     0.5     1.0  
            Financial & Professional Services   0.4     0.3     0.7  
            Technology   0.3     _     0.3  
            Public Sector   0.2     _     0.2  
            Oil and Gas   0.2     _     0.2  
            Specialty Programs   0.2     _     0.2  
            Umbrella/E&S Group   0.2     _     0.2  
            Personal CAT Risk   0.1     _     0.1  
            Gulf   _     0.6     0.6  
            International   0.6     _     0.6  
            Lloyd’s   0.7     _     0.7  
            Other   0.3     –     0.3  
   
   
   
 
      Total Specialty Commercial Lines $ 4.5   $ 1.9   $ 6.4  
   
   
   
 
      Total Commercial Lines $ 7.5   $ 8.1 $ 15.6  
      Total Personal Lines   _     5.0     5.0  
   
   
   
 
      Total Insurance Premiums $ 7.5   $ 13.1 $ 20.6  
   
   
   
 

 

2002 Net Written Premium Distribution by Line

 

Source: Company reports.





 

Commercial Lines Diversification in U.S.

Source: A.M. Best. Based on 2002 direct premiums written. The following A.M. Best lines of business are included in the definition of "Commercial Lines" as shown in the charts: Fire, Allied Lines, Ocean Marine, Inland Marine, Earthquake, Workers' Compensation, Other Liability, Products Liability, Burglary & Theft, Boiler & Machinery, Commercial Multi-Peril (Liability & Non-Liability), Commercial Auto Liability, Commercial Auto, Physical Damage, and Commercial Auto No-Fault. (1) Includes District of Columbia.

Principal Terms of the Transaction





 

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