Smith Barney also said it suspects that The St. Paul was motivated to take a conservative approach partly in order to start the pending merger with Travelers Property Casualty Corp. with a clean slate. "The St. Paul management likely has an incentive to clear the decks in advance of the pending merger with Travelers Property Casualty," Mr. Frank commented on the St. Paul, Minn.-based insurer.

The St. Paul, as it took the reserve-charge, said its ongoing business continued to perform well during the 2003 fourth quarter, with net written premiums of $1.86 billion, up 25 percent from one year ago.

The company said its statutory combined ratio was 89.5 percent for the fourth quarter. For full-year 2003, The St. Paul said its ongoing business results would include $7.33 billion in net written premium, which would be a 24 percent increase from 2002, and a statutory combined ratio of 91.7 percent.

The St. Paul expects to release its fourth-quarter 2003 earnings after the market closes next Wednesday. The company said the announced merger of The St. Paul and Travelers remains on track to close in the second quarter of 2004.

The St. Paul offers liability and casualty, property, workers' comp, auto, marine, and other commercial coverage. Its international operations include Lloyd's of London syndicates that specialize in niche markets, including kidnap and ransom, personal accident, and creditor coverage.