Canadian Underwriter

St. Paul and Travelers Merge in Stock Deal

December 1, 2003   by Canadian Underwriter

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The St. Paul Companies Inc. and Travelers Property Casualty Corp. recently announced a merger of the two companies to form a US$20 billion global operation based on net written premiums. The deal, which involves a trading of stock between the two companies, is subject to regulatory approval with the expectation that it will be finalized by the second quarter of next year. The new company will be named The St. Paul Travelers Companies.

While the merger of the St. Paul and Travelers will boost the combined operation into second spot in the U.S. commercial insurance market, the impact on the Canadian marketplace is less dramatic. The merger will see The St. Paul Travelers jump to 22 spot in Canadian marketshare ranking based on total annual net written premiums of $325.5 million for 2002.

While it is still “early days” in determining how the Canadian operations will be integrated, there is definitely a complementary mix of business held by the two companies, observes Robert Fellows, president of St. Paul Canada. The St. Paul and Travelers also have a similar underwriting philosophy, he adds. Cindy Guyatt, president of Travelers Casualty and Surety Co. of Canada, says “it’s [the merger] a huge undertaking, and we don’t have anything concrete yet [to report].” The St. Paul operates in Canada through St. Paul Canada (with $190.6 million in net written premiums for 2002) and The St. Paul Guarantee Insurance Co. ($110.6 million in net written premiums for 2002). Travelers underwrites in Canada through Travelers Casualty and Surety Co. of Canada (2002: $23.6 million in net written premiums) and The Travelers Indemnity Co. (2002: $879,000 in net written premiums).

Fellows says integration of the two companies’ Canadian operations will be a lot easier to achieve than the U.S. situation simply because of size. The St. Paul has offices in most provinces of Canada, he adds, and maintains two head-offices in Toronto. In comparison, Travelers only has a Toronto office. In this respect, Fellows expects that integration of the companies will only see consolidation of offices in Toronto. “In the meantime, it’s business as usual,” he notes.

At the global level, the merger of the two companies will result in an operation with total assets of about US$107 billion, and shareholders’ equity of US$20 billion. Jay Fishman, current CEO of The St. Paul, will take the executive helm at the new company. Robert Lipp, CEO of Travelers, will hold the position of executive chairman until the beginning of 2006, whereupon Fishman is expected to take over as both CEO and chairman of The St. Paul Travelers Companies. “From a financial standpoint, I expect the transaction to enhance growth opportunities and enable the combined company to benefit from improved efficiencies and economies of scale,” Fishman says.