Letter to Shareholders

Interview with the Chairman

The Elements of Success

Focused Strategy

Strong Management

Market Presence

Industry-specific Expertise

Financial Strength

Shareholder Value

Management's Discussion and Analysis

Overview

Underwriting

U. S. Underwriting

St. Paul International Underwriting

St. Paul Re

Investment operations

Loss and loss adjustment expense reserves

Environmental and asbestos claims

Life Insurance F & G Life

Asset management-investment banking

The St. Paul Companies, Inc.

Capital resources

Liquidity

Exposures to market risk

Year 2000 issues

Impact of Accounting Pronouncements to be adopted in the future

Forward-looking statement disclosure

Six-year summary of selected financial data

Independent auditor's report

Management's responsibility for financial statements

Financial statements

Consolidated statements of income

Consolidated statements of comprehensive income

Consolidated statements of shareholders' equity

Consolidated balance sheets

Consolidated statements of cash flows

Notes to financial statements

Summary of significant accounting policies

Merger with USF&G Corporation

Earnings per common share

Investments

Investment transactions

Derivative financial instruments

Reserves for losses, loss adjustment expenses and life policy benefits

Income taxes

Capital structure

Retirement plans

Stock incentive plans

Commitments and contingencies

Discontinued operations

Acquisitions

Reinsurance

Statutory accounting practices

Segment information

Comprehensive income

Quarterly results of operations (unaudited)