The St. Paul to Sell Nonstandard Auto Business to Prudential Insurance for $200 Million
4 January 2000
The St. Paul to Sell Nonstandard Auto Business to Prudential Insurance for $200 Million
SAINT PAUL, Minn.--Jan. 4, 2000--on core commercial insurance specialties
The St. Paul Companies announced today a definitive agreement to sell its nonstandard auto insurance business to The Prudential Insurance Company of America for $200 million in cash, subject to certain balance sheet adjustments at closing. The proceeds from the sale, to be paid upon closing, will be used for general corporate purposes, which may include strategic acquisitions, expansion of specialty product offerings, and continuation of The St. Paul's share repurchase program.
The sale reflects The St. Paul's continuing strategy of focusing its property-liability insurance operations on its business and professional insurance lines, which include $4.2 billion in annual net written premiums in specialty and general commercial property-liability insurance and $1.1 billion in reinsurance.
"This transaction furthers our strategy of becoming a preeminent worldwide commercial insurance company, with our resources fully focused on the general commercial and specialty segments in which we have a top-tier presence, a reputation for excellence, and opportunities to extend our franchise globally," commented Douglas W. Leatherdale, chairman and chief executive officer.
"Although the nonstandard auto insurance business has been successful, it is better suited to a company with a broader presence in the personal lines marketplace," Leatherdale said.
Under the terms of the agreement, Prudential will purchase the nonstandard auto insurance business marketed under the Victoria Financial and Titan Auto brands. Nonstandard auto coverages are marketed to individuals who are unable to obtain standard coverage due to their inability to meet certain underwriting criteria. The purchase includes the legal entities Victoria and Titan Groups and their subsidiaries.
The nonstandard auto businesses are operated as St. Paul Specialty Auto (SPSA), headquartered in Cleveland, with 900 employees located in 15 states. SPSA writes business in 21 states through 7,700 agents and direct marketing. In 1998, SPSA recorded $245 million in net written premiums.
The transaction excludes the commercial lines public entity business written by Titan Indemnity Company. That business will remain with The St. Paul as part of its unit specializing in insurance for the public sector.
The St. Paul's current GAAP carrying value of the businesses to be sold is $275 million, including $112 million of goodwill associated with the purchase of Titan Auto in 1997 by USF&G, the insurer subsequently acquired by The St. Paul. The purchase price represents 123 percent of tangible book value. The St. Paul anticipates recording a pretax loss on sale of approximately $75 million. The balance sheets of the legal entities to be sold include invested assets of $287 million and insurance reserves of $283 million.
The transaction is expected to close in the second quarter of 2000, subject to satisfaction of various conditions, including regulatory approvals. Effective in the fourth quarter of 1999, SPSA's operating results and the anticipated loss on sale will be reported in discontinued operations.
The St. Paul Companies, headquartered in Saint Paul, Minn., is a group of companies providing property-liability insurance, reinsurance and life insurance products and services worldwide. The St. Paul ranked No. 171 on the most recent Fortune 500 list of largest U.S. companies.
Certain statements made in this release may constitute forward-looking statements. Actual results may differ materially from those projected in the forward looking statements. These forward looking statements involve risks and uncertainties including, but not limited to timely receipt of regulatory approvals and satisfaction of conditions to closing.