MOODY'S UPGRADES DEBT RATINGS OF TRAVELERS GROUP INC. AND DEBT AND FINANCIAL STRENGTH RATINGS OF ITS PRINCIPAL INSURANCE SUBSIDIARIES
New York, 04-10-97 -- Moody's Investors Service raised its ratings on the debt and preferred stock of Travelers Group Inc. (senior debt to Aa3 from A1, and preferred stock to "aa3" from "a1"). In addition, Moody's upgraded its insurance financial strength ratings of Travelers Insurance Company to Aa3, from A1, and of members of the Travelers Property Casualty Group to Aa3, from A1. The debt and preferred stock ratings for Travelers Property Casualty Corp. were also raised (senior debt to A1, from A2; preferred stock to "a1", from "a2"). The Prime-1 short-term debt ratings of Travelers Group Inc., Travelers Property Casualty Corp., and Travelers Insurance Company were confirmed. According to Moody's, these rating actions reflect Travelers Group's overall earnings strength, growth and diversity, as well as its sound competitive and financial positions, as well as the enhanced operating and financial positions of the Travelers Property Casualty Group, and Travelers Insurance Company. Moody's rating outlooks for Travelers Group, Travelers Property Casualty Group and Travelers Insurance Company are stable.
Expanding on its rating rationale, Moody's noted that all of Travelers Group's operating units continue to generate strong earnings performance and business growth, and that the group's overall healthy financial performance and market position should be sustained. The rating agency noted that each of Travelers' principal subsidiaries -- including Smith Barney (senior long-term debt at A2), Travelers Property Casualty Corp., Travelers Insurance Company, Primerica Life Insurance Company (insurance financial strength at Aa3), and Commercial Credit Company (senior long-term debt at A1) -- continue to benefit from sound financial and operational controls, good asset quality and liability valuations, and disciplined asset/liability and capital management. Moody's added that the Travelers Group's strong name recognition among retail and institutional customers, together with its multi-faceted product distribution capabilities, should enable Travelers to offer an increasingly broad array of financial products and services to its diverse customer base. Moody's added that the global financial services industry continues to restructure, and that the Travelers Group has yet to establish a significant presence in international markets. Large financial services acquisitions, either in the USA or overseas, by Travelers could occur, and might place strain on the organization's capital structure. The rating agency added, however, that it believes that Travelers would continue to finance such acquisitions soundly.
With respect to Travelers Property Casualty operations, Moody's noted that the firm's success in assimilating the acquired Aetna operations has enabled it substantially to boost its position in the US property and casualty market, while also providing the opportunity to compress operating expenses and to enhance its competitive strength in the intensely competitive retail and commercial insurance markets. Today, Travelers P&C is the third-largest US-based underwriter of commercial and specialty insurance, and the seventh-largest provider of personal lines insurance. Among independent-agency writers, Travelers P&C is the largest insurer of personal lines coverages. In addition, Moody's noted that the consolidation of most members of the former Travelers Indemnity and Aetna P&C groups within a single intercompany pool is a positive rating consideration, and a demonstration of the strategic role of the acquired operations. Moody's is also encouraged by efforts to reduce aggregate exposures to losses from natural catastrophes. Moody's added, however, that challenges for Travelers P&C include sustained intense price competition in both commercial and personal lines, the challenge of independent agency distribution in personal lines, and the ongoing management of claims related to environmental, asbestos, and other mass-tort exposures.
Commenting upon its upgrade of Travelers Insurance Company, Moody's noted the company's return to a strong level of profitability and its excellent risk-adjusted capitalization, its focused product lines and access to multiple product distribution channels within the Travelers organization, and its success in eliminating most of the company's exposure to underperforming real estate assets. The rating agency added, however, its continuing concerns about the company's shrinking asset base, its heavy dependence on market-sensitive investment-oriented life insurance and annuity products -- with their associated disintermediation exposures -- and the potential for elevated dividend payout levels to the company's parent.
The following ratings were changed:
Travelers Group Inc. -- senior debt to Aa3 from A1; preferred stock to "aa3" from "a1".
Travelers Capital Trust I, II, III, IV, V -- trust preferred stock to "aa3" from "a1".
Travelers Property Casualty Corp. -- senior debt to A1 from A2.
Travelers P&C Capital Trust I, II -- trust preferred stock to "a1" from "a2".
Travelers P&C Capital Trust III -- trust preferred stock to (P)"a1" from (P)"a2".
Travelers Insurance Company -- insurance financial strength to Aa3 from A1.
Travelers Property Casualty Group -- insurance financial strength to Aa3 from A1, for the following insurers:
The Travelers Indemnity Company
The Travelers Indemnity Company of America
The Travelers Indemnity Company of Connecticut
The Aetna Casualty and Surety Company
Aetna Casualty and Surety Company of America
Aetna Casualty and Surety Company of Illinois
Aetna Casualty Company of Connecticut
Aetna Commercial Insurance Company
Aetna Insurance Company
Aetna Insurance Company of Illinois
Aetna Personal Security Insurance Company
The Automobile Insurance Company of Hartford, CT
The Charter Oak Fire Insurance Company
Farmington Casualty Company
The Phoenix Insurance Company
The Standard Fire Insurance Company
The following ratings were confirmed by Moody's:
Primerica Life Insurance Company -- insurance financial strength of Aa3.
Commercial Credit Company -- senior debt at A1; Prime-1 rating of the company for short-term debt.
Smith Barney Holdings, Inc. -- senior debt at A2.
Smith Barney Inc. -- Prime-1 rating of the company for short-term debt.
Travelers Group Inc., based in New York City, is a diversified financial services holding company that is engaged, through its subsidiaries, in four major business segments: investment services (Smith Barney), property and casualty insurance (Travelers Property Casualty), life insurance and related products (Travelers Insurance and Primerica Financial Services), and consumer finance (Commercial Credit). Travelers Group reported net income of $2.3 billion, assets of $151 billion, and equity of $13.1 billion for the year ended December 31, 1996.
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