MOODY'S CONFIRMS FINANCIAL STRENGTH RATINGS OF TRAVELERS PROPERTY CASUALTY CORP. COMPANIES FOLLOWING ANNOUNCED MERGER WITH THE ST. PAUL COMPANIES; REVIEWS SENIOR DEBT RATINGS FOR POSSIBLE DOWNGRADE
Two Leading U.S. Property & Casualty Insurers Announce Definitive Merger Agreement
New York, November 17, 2003 -- Moody's Investors Service has confirmed the insurance financial strength
ratings of the rated subsidiaries of Travelers Property Casualty Corp.
(NYSE: TAP.A and TAP.B). The long-term
debt ratings of Travelers Property Casualty Corp. and Travelers
Insurance Group Holdings, Inc. have been placed on review
for possible downgrade. The insurance financial strength ratings
retain their current stable outlook.
The rating action follows today's announcement of a definitive merger
agreement between The St. Paul Companies, Inc. and
Travelers Property Casualty Corp., creating the nation's
second largest commercial insurer, to be known as The St.
Paul Travelers Companies. Under the terms of the merger agreement,
holders of Travelers Class A and Class B common stock will each receive
0.4334 St. Paul common shares for each Travelers share,
in a tax-free, stock-for-stock merger.
The St. Paul Travelers Companies will have its corporate headquarters
in Saint Paul, Minnesota, where the specialty commercial operations
will be based. Hartford, Connecticut will be the base of
operations for the new company's commercial lines and personal lines
businesses. The transaction, which has been approved by the
companies' respective Boards of Directors, remains subject to regulatory
and shareholder approvals, and is expected to close in the second
quarter 2004. The new Board of Directors will consist of twelve
Travelers directors and eleven The St. Paul directors.
Regarding the decision to review Travelers debt ratings for possible downgrade,
Moody's noted that the combined group would likely have higher financial
leverage, at least over the near term, and that --
in addition to the execution/integration risk posed by the transaction
itself -- there is elevated risk to the holding company
as owner of St. Paul's relatively weaker operating insurers.
After the announced merger with The St. Paul Companies is completed,
Moody's said it is likely that a more traditional three-notch relationship
between senior debt and insurance financial strength ratings would prevail.
Moody's believes that the prospective benefits to Travelers of the proposed
merger with the St. Paul Companies (in terms of greater market
presence, scale and geographic diversification) would be offset
by the incrementally increased underwriting risk profile of the combined
companies, due, in part, to run-off portfolios
at St. Paul Fire and Marine Insurance Company. Moody's noted
that Travelers' insurance financial strength ratings continue to
reflect the company's leadership position as one of the largest property-casualty
insurers in the US, its strong product distribution capabilities
through independent agents, its commitment to underwriting discipline
and strong customer service capabilities, and its strong earnings
capacity and solid financial profile - given its continued solid
capitalization, reserve and investment profile, and its still
relatively modest financial leverage. In Moody's view, these
fundamental strengths remain tempered primarily by stiff competition in
the company's chosen market segment, and by meaningful underwriting
exposures to natural catastrophe losses as well as legacy exposures to
asbestos claims.
The following ratings have been placed on review for possible downgrade:
Travelers Insurance Group Holdings, Inc. --
senior debt at A2,
Travelers Property Casualty Corp. -- junior subordinated
debt at A3.
The following ratings have been confirmed:
Members of the Travelers Indemnity intercompany pool:
Automobile Insurance Company of Hartford - insurance financial
strength at Aa3,
Charter Oak Fire Insurance Company - insurance financial strength
at Aa3,
Farmington Casualty Company - insurance financial strength at Aa3,
Phoenix Insurance Company - insurance financial strength at Aa3,
Standard Fire Insurance Company - insurance financial strength
at Aa3,
Travelers Casualty Company of CT - insurance financial strength
at Aa3,
Travelers Casualty and Surety Company of Illinois - insurance financial
strength at Aa3,
Travelers Casualty and Surety Company - insurance financial strength
at Aa3,
Travelers Commercial Insurance Company - insurance financial strength
at Aa3,
Travelers Indemnity Company - insurance financial strength at Aa3,
Travelers Indemnity Company of America - insurance financial strength
at Aa3,
Travelers Indemnity Company of CT - insurance financial strength
at Aa3,
Travelers Indemnity Company of Illinois - insurance financial strength
at Aa3,
Travelers Personal Security Insurance Company - insurance financial
strength at Aa3,
Travelers Property Casualty Company of Illinois - insurance financial
strength at Aa3,
Travelers Property Casualty Company - insurance financial strength
at Aa3;
Members of the Gulf Insurance intercompany pool:
Gulf Insurance Company - insurance financial strength at A2,
Gulf Underwriters Insurance Company - insurance financial strength
at A2,
Atlantic Insurance Company - insurance financial strength at A2,
Select Insurance Company - insurance financial strength at A2;
Travelers Casualty and Surety of America - insurance financial
strength at Aa3;
Gulf Insurance Company U.K. Ltd. - insurance
financial strength at A1.
Travelers Property Casualty Corp., based in Hartford,
CT, is an insurance holding company for subsidiaries that provide
a broad range of insurance products and services for commercial markets,
as well as personal lines homeowners and auto insurance. At September
30, 2003, Travelers Property Casualty reported GAAP shareholders'
equity of $11.5 billion, and total revenues and net
income for the nine month period ended September 30, 2003 of $11.1
billion and $1.2 billion, respectively.
Moody's insurance financial strength ratings are opinions of the ability
of insurance companies to punctually repay senior policyholder claims
and obligations. For more information, visit our website
at www.moodys.com/insurance.
New York
Ted Collins
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Karen Davies
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653