The St. Paul and USF&G Announce Merger Agreement

The St. Paul and USF&G announced on Jan. 19 that their boards of directors have unanimously approved a merger that, when done, will create the eighth largest property and casualty insurer in the U.S.

The new firm will have net written premiums of $7 billion, total assets of $36 billion and a combined market capitalization of $10 billion.

The company will have a substantial market presence in key areas of the specialty insurance business, as well as in surety, reinsurance and certain other niches of commercial insurance.

Douglas W. Leatherdale will continue to serve as chairman, president and CEO of The St. Paul Companies. Following the completion of the merger, USF&G Chairman Norman P. Blake, Jr. will serve as The St. Paul's vice chairman to assist in the integration process. Patrick A. Thiele, executive vice president of The St. Paul Companies and CEO of The St. Paul's Worldwide Insurance Underwriting Operations, will lead the combined insurance underwriting organizations. Blake, as well as two other members of the USF&G Board, will be added to The St. Paul Board of Directors.

The total value of the transaction is $3.5 billion, which includes $2.8 billion of equity plus the assumption of approximately $400 million in debt and $300 million of capital securities. The transaction is expected to close in mid-1998. Each USF&G share will be converted into $22 of St. Paul common stock subject to an exchange ratio adjustment.

The company plans to take a restructuring charge of between $300 million and $500 million in 1998. It also expects a number of redundant positions to be eliminated, through attrition or otherwise, although no specific number was given. The combined company is expected to continue to be an employer of significance in the Baltimore area.

The transaction is subject to various federal and state regulatory approvals, and votes by USF&G and St. Paul shareholders. Proxy statements will be filed with the Securities and Exchange Commission and will include detailed information related to the transaction.