The cost-cutting effort includes cutting about 3,000 jobs in addition to reducing advertising and legal expenses, Chief Executive Jay Fishman told investors Wednesday during a presentation in Wilmington, Del.
The announcement comes as some investors and analysts are questioning the wisdom of the merger.
"The merger of the two companies was far from a 'merger of equals' and was more representative of a 'bailout' of St. Paul Companies," Michael Paisan, a research analyst at Legg Mason Wood Walker of Baltimore, wrote in a recent research report. Four investment firms have lowered their opinion of St. Paul Travelers since late June, citing concerns with the company's balance sheet and earnings quality. The insurer took a $1.63 billion charge in July - about twice what analysts had expected - largely because the St. Paul's actuarial standards were less conservative than Travelers'.
St. Paul Travelers stock is down 16 percent since the merger.
Facing pressure from large institutional shareholders, Fishman provided a detailed analysis of the company's cost-cutting efforts and the state of the property and casualty insurance industry.
Pricing in some segments of St. Paul Travelers' business has become more competitive and the company is turning away business rather than lowering prices to unprofitable levels, Fishman said.
"If it makes sense, we'll compete," he said. "If it doesn't make sense, we'll sit on the sidelines."
The company has projected $468 million in expense cuts through 2006 but wants to cut $100 million more starting in 2005, Fishman said. That compares with a goal of $350 million in cuts announced in November.
To deliver those savings, St. Paul Travelers expects to eliminate about 10 percent of its total work force. Fishman said additional savings would come from using fewer law firms to defend claims and reducing the company's advertising budget.
Spokeswoman Joan Palm said "small pockets" of employees have been dismissed throughout the company but declined to give specific numbers. She said St. Paul Travelers hoped to achieve much of the job reductions through attrition and retirement.
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Information from: Star Tribune, http://www.startribune.com