As the eighth-largest property-liability insurer in the United States post-merger, we are among a small number of leading companies with the financial strength and market presence to be successful in a difficult environment. However, the consolidation in our industry is not over. Our financial strength gives us the flexibility to be a consolidator, taking advantage of marketplace opportunities that will further strengthen us.

The quality of our balance sheet is also a marketing advantage. Insurance buyers, especially the increasingly large and sophisticated buyers, scrutinize insurers' financial standings to make sure the funds are there to cover their losses in a worst-case scenario. The St. Paul's financial strength ratings by Moody's, Standard & Poor's and A.M. Best are among the strongest in our industry.

Our assets reached a new high in 1998 -- $38.3 billion. High-grade bonds comprise the majority of our underwriting operations' assets. Our widely diversified fixed income portfolio maximizes investment income while minimizing credit risk. We also invest in stocks, real estate and venture capital investments to provide for long-term growth in our portfolio.

Our investment portfolio produced $1.6 billion in pretax investment income in 1998. Because The St. Paul sells more "long-tail" insurance than average, our investment portfolio is larger than average for our premium volume (long-tail insurance includes coverages such as professional liability, in which claims generally are not settled as quickly as homeowners or automobile insurance, for example). Thus, we are able to hold funds longer, and the percentage of our earnings that comes from our investments is higher than average. That's important, because it gives us a stable, predictable base of revenues in volatile years such as 1998.

One of the most important components of our financial position is our loss reserve strategy. There is, in fact, a range of loss reserve strength and strategy in our industry. It is our policy to maintain our reserves -- the money set aside to pay claims -- at a strong, conservative level. The wisdom of that strategy was made clear in 1998, when storm followed storm. Our underlying strength was not compromised.

Our ratio of debt to total capitalization was a conservative 15 percent in 1998. Moody's and Standard & Poor's give our senior debt and commercial paper very strong ratings.

Take a look at us from any angle -- our financial position is among the strongest in our industry.