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Insurance industry

St. Paul Travelers Companies Delays Financial Statements Amid Merger and Accounting Changes

Strategic Insights

— 2 min read

The St. Paul Travelers Companies, formed by the merger of the St. Paul Companies and the Travelers Property Casualty Corporation, has surprised investors by delaying its financial statements until it receives guidance from the Securities and Exchange Commission on how to handle a $1.6 billion write-off. The company, one of the largest commercial insurers, has postponed its earnings announcement until August 9, citing a need to clarify the accounting treatment of the write-off, which would have resulted in a profit of at least $775 million or a loss of at least $275 million for the second quarter. The market reaction has been relatively mild, with shares closing down 2.4 percent at $35.66.

Key Takeaways:

  • The St. Paul Travelers Companies has delayed its financial statements until August 9 to await guidance from the Securities and Exchange Commission on how to handle a $1.6 billion write-off.
  • The company has postponed its earnings announcement, citing a need to clarify the accounting treatment of the write-off, which would have resulted in a profit of at least $775 million or a loss of at least $275 million for the second quarter.
  • The market reaction has been relatively mild, with shares closing down 2.4 percent at $35.66.
  • The delay is attributed to the company's recent merger and changes in accounting rules, which can be tricky to apply to a property casualty insurance company.
  • Analysts regard the postponement as a cautious step from a company that has just completed a merger and is confronting several recent changes in accounting rules.
  • The $1.6 billion write-off is an indication that St. Paul had previously underestimated what it would have to pay for claims.
  • The central accounting issue is whether to report the $1.6 billion as a cost to St. Paul before the merger, or as a cost to the combined company.

Statistics:

  • $1.6 billion: The amount of the write-off that St. Paul Travelers needs to cover claims on insurance written by St. Paul before the merger.
  • 2.4 percent: The percentage decrease in shares of St. Paul Travelers on the day of the announcement.
  • $35.66: The closing price of St. Paul Travelers shares on the day of the announcement.
  • 89 cents: The amount of decrease in shares of St. Paul Travelers on the day of the announcement.
  • August 9: The new date for the earnings announcement.
  • $775 million: The minimum profit that St. Paul Travelers would have recorded for the second quarter if the write-off is accounted for in one way.
  • $275 million: The minimum loss that St. Paul Travelers would have recorded for the second quarter if the write-off is accounted for in another way.

Sources:

  • "St. Paul Travelers Companies Delays Financial Statements" by Kenneth A. Bentson, published in the New York Times.
  • Bloomberg News, caption by Scott Eells.

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