The deal to merge the St. Paul Cos. and Travelers Property Casualty Corp. is on track to create the second-largest insurer in the country, with top market shares in 22 states, according to Jay Benet, chief financial officer of Hartford, Conn.-based Travelers.Benet, who is the designated CFO for the projected St. Paul Travelers Cos., discussed some terms of the deal in December at the Bank One Capital Markets Insurance Company Investors Conference. The deal, announced on Nov. 17, will be a tax-free transaction, with an exchange of 0.4334 St. Paul share for each Travelers share.

The post-merger company's board will have 12 Travelers directors and 11 St. Paul directors, including all the outside directors of both companies, plus Jay Fishman as president and chief executive officer and Robert Lipp as chairman. Fishman, who is St. Paul's CEO, is to succeed Lipp, Travelers' CEO, as the combined company's chairman on Jan. 1, 2006.

William Bloom will be senior vice president and CIO of St. Paul Travelers. Bloom recently joined Travelers after serving as a partner in the financial services practice at Accenture.

Adding together the projected 2003 premium volumes for both companies indicates the post-merger company would have more than $20 billion of premium revenue, more than $15 billion coming from commercial lines business and more than $5 billion from personal lines, according to Benet.

Market clout

The combined company will have total assets of $107 billion and total capital of $26 billion. The company will be headquartered in St. Paul, Minn. Specialty insurance lines will be based in St. Paul, while the combined company's commercial and personal lines business will be consolidated under the Travelers brand and based in Hartford, Conn.

Despite Travelers' size, it had top market share in only one state-Nebraska-Benet says. And St. Paul was not the market leader in many states either, he adds.

But combined, St. Paul Travelers would have top market share in 22 states, mainly in the Southeast and Midwest, as well as No. 2 positions in 13, according to A.M. Best.

St. Paul Travelers will rank second in domestic commercial lines, second in agent-distributed personal lines, and fifth overall among domestic property/casualty lines.

"I think we're in a unique situation because of the companies' knowing each other pretty well," Benet says. Fishman was the CEO of Travelers before joining St. Paul in 2001. In addition, Benet said, "both of the companies are pursuing similar business strategies."

Both the commercial lines and personal lines businesses were important to the company, he said, and the combined company would consider acquisitions in either area. "We don't have any optimal mix" for the split between commercial and personal, Benet says. He noted renewal prices on commercial business are still rising, though not as fast as earlier this year. In the third quarter, renewal prices were up 9%; in the second quarter, 10%; and in the first quarter, 16%.

"Only time will tell" how long the hard market will last, he adds.

This article first appeared in American Banker, a Thomson Media publication. It has been modified for this publication.

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