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Rating Action:

MOODY'S LOWERS RATINGS OF TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES (SENIOR UNSECURED TO A2 FROM A1); RATING OUTLOOKS UNCHANGED

14 Jan 2003
MOODY'S LOWERS RATINGS OF TRAVELERS PROPERTY CASUALTY CORP. AND SUBSIDIARIES (SENIOR UNSECURED TO A2 FROM A1); RATING OUTLOOKS UNCHANGED

Leading US Property & Casualty Insurer Announces $1.3 Billion Fourth Quarter Charge for Asbestos Liabilities.

New York, January 14, 2003 -- Moody's Investors Service has lowered the long-term debt and insurance financial strength ratings of Travelers Property Casualty Corp. and its rated subsidiaries (Travelers Indemnity pool and Travelers Casualty and Surety of America insurance financial strength to Aa3 from Aa2, Gulf pool insurance financial strength to A2 from A1, Gulf UK insurance financial strength to A1 from Aa3; senior unsecured debt to A2 from A1). At their new levels, these ratings retain their current outlooks, which are 'stable' except for Gulf UK, whose outlook continues to be 'developing'.

According to Moody's, the rating downgrades are prompted by Travelers' $1.3 billion after-tax charge for the fourth quarter of 2002, announced earlier this morning, in connection with the company's revised estimate of its exposure to asbestos liabilities, in part reflecting recent claims experience and industry-wide trends. The present charge, which is net of a cession under the company's indemnification agreement with Citigroup, Inc., results in an increase of the company's asbestos reserves to $3.4 billion after reinsurance recoverables, from $950 million at September 30, 2002. Although the Gulf insurance companies are not directly affected by the asbestos-related charges, their ratings are influenced by those of Travelers Indemnity and its pooled affiliates and Travelers Property Casualty Corp.

Moody's noted that the charge exceeded the rating agency's expectations for Travelers' potential further asbestos liabilities at the current rating level, and that the largely debt-based recapitalization has resulted in a somewhat elevated financial leverage profile for the combined holding companies. Moody's added, however, that it considers Travelers' updated analysis of the group's asbestos-related exposures to be generally robust and well-conceived, supported by a review of past settlements, all active policyholders, litigation and potential non-product exposures. Moody's further noted that it views Travelers' charge for asbestos-related liabilities as reflective of an increasing industrywide burden associated with asbestos-related litigation. The rating agency added that estimates for asbestos-related claim liabilities have recently increased significantly as a result of bankruptcies among major manufacturers, a broadening of litigation to include peripheral defendant classes, and an expanded range of coverages being asserted, among other factors.

The rating agency noted that it believes that Travelers Property Casualty remains sufficiently committed to maintaining a strong holding company liquidity position even after further capitalization of its insurance subsidiaries. Moody's added that this, in combination with the strong capitalization and annual dividend capacity of the principal insurance subsidiaries, continues to support a closer rating spread than would be customary.

Moody's noted that Travelers Property Casualty's ratings continue to reflect the company's leadership position as one of the five largest property/casualty insurers in the USA, 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.

The following ratings have been lowered:

Travelers Insurance Group Holdings, Inc. -- senior debt to A2 from A1,

Travelers Property Casualty Corp. -- junior subordinated debt to A3 from A2,

Travelers P&C Capital I and II - trust preferred securities to A3 from A2,

Travelers Casualty and Surety of America - insurance financial strength to Aa3 from Aa2;

members of the Travelers Indemnity intercompany pool:

Automobile Insurance Company of Hartford - insurance financial strength to Aa3 from Aa2,

Charter Oak Fire Insurance Company - insurance financial strength to Aa3 from Aa2,

Farmington Casualty Company - insurance financial strength to Aa3 from Aa2,

Phoenix Insurance Company - insurance financial strength to Aa3 from Aa2,

Standard Fire Insurance Company - insurance financial strength to Aa3 from Aa2,

Travelers Casualty Company of CT - insurance financial strength to Aa3 from Aa2,

Travelers Casualty and Surety Company of Illinois - insurance financial strength to Aa3 from Aa2,

Travelers Casualty and Surety Company - insurance financial strength to Aa3 from Aa2,

Travelers Commercial Insurance Company - insurance financial strength to Aa3 from Aa2,

Travelers Indemnity Company - insurance financial strength to Aa3 from Aa2,

Travelers Indemnity Company of America - insurance financial strength to Aa3 from Aa2,

Travelers Indemnity Company of CT - insurance financial strength to Aa3 from Aa2,

Travelers Indemnity Company of Illinois - insurance financial strength to Aa3 from Aa2,

Travelers Personal Security Insurance Company - insurance financial strength to Aa3 from Aa2,

Travelers Property Casualty Company of Illinois - insurance financial strength to Aa3 from Aa2,

Travelers Property Casualty Company - insurance financial strength to Aa3 from Aa2;

members of the Gulf Insurance intercompany pool:

Gulf Insurance Company - insurance financial strength to A2 from A1,

Gulf Underwriters Insurance Company - insurance financial strength to A2 from A1,

Atlantic Insurance Company - insurance financial strength to A2 from A1,

Select Insurance Company - insurance financial strength to A2 from A1;

Gulf Insurance Company U.K. Ltd. -- insurance financial strength to A1 from Aa3.

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.

New York
Alan Murray
VP - Senior Credit Officer
Property & Casualty Insurance
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Ted Collins
Managing Director
Property & Casualty Insurance
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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