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Rating Action:

MOODY'S UPGRADES RATINGS OF CERTAIN SUBSIDIARIES OF ST PAUL TRAVELERS COMPANIES, INC. (INSURANCE FINANCIAL STRENGTH RATINGS TO Aa3) FOLLOWING RE-POOLING; PARENT COMPANY DEBT RATINGS' AFFIRMED (A3 SENIOR) AND OUTLOOK REMAINS NEGATIVE

14 Jul 2005
MOODY'S UPGRADES RATINGS OF CERTAIN SUBSIDIARIES OF ST PAUL TRAVELERS COMPANIES, INC. (INSURANCE FINANCIAL STRENGTH RATINGS TO Aa3) FOLLOWING RE-POOLING; PARENT COMPANY DEBT RATINGS' AFFIRMED (A3 SENIOR) AND OUTLOOK REMAINS NEGATIVE

Combination of Intercompany Pools Completed

New York, July 14, 2005 -- Moody's Investors Service announced today that it has upgraded the insurance financial strength ratings of members of the legacy St. Paul, United States Fidelity & Guaranty (USF&G) and Gulf Insurance pools to Aa3 following the recent completion of the re-pooling of these companies with the legacy Travelers Indemnity Company pool (whose pooled companies are already rated Aa3 for insurance financial strength) and the dissolution of the legacy pooling agreements. Under these pooling agreements, all member companies now cede virtually all of their premiums, claims and expenses to the lead company (Travelers Indemnity Company) and then in turn recapture a percentage of the total combined results. The re-pooling was effective for both in-force and prospective business.

Expanding on its rationale, Moody's noted that the re-pooling of the St. Paul, USF&G and Gulf entities has improved their spread of risk and reduced their operating leverage profile, better aligning these measures across the entire St. Paul Travelers organization. Additionally, the rating of Gulf Insurance Company will be withdrawn, following that company's recently completed legal merger into Travelers Indemnity Company. The outlook for all of the insurance financial strength ratings is now negative, consistent with the existing outlook for members of the Travelers Indemnity pool.

In the same action, Moody's also affirmed the long-term and short-term debt ratings of St. Paul Travelers Companies Inc. (senior unsecured debt at A3, commercial paper at Prime-2) and those of its downstream debt-issuing subsidiaries.

The affirmation of these ratings reflects the significant franchise created upon the merger of Travelers and St. Paul, its strong position in many commercial and personal property casualty market segments, high quality investment portfolio, and adequate liquidity. Tempering these strengths are concerns related to the risk of further adverse loss development, especially for runoff businesses and latent liabilities, integration and execution risks related to the merger, financial leverage on a tangible basis, and meaningful exposure to catastrophe losses.

On February 1, 2005, Moody's changed the outlook for the debt ratings and for the insurance financial strength ratings of members the Travelers' Indemnity pool to negative from stable. The negative outlook on the debt ratings and on the newly combined St. Paul Travelers pool primarily reflects Moody's view that significant uncertainty remains around the ultimate liabilities for A&E reserves as well as the combined group's improved but still higher risk-adjusted operating leverage and lower capitalization relative to similarly-rated peers.

According to Moody's, resolution of the negative outlook will focus on the capital adequacy of the operating companies and St. Paul Travelers' ability to generate materially improved after-tax operating earnings in 2005 of over $3 billion. Moody's notes that meeting these expectations, together with adverse reserve development (including A&E reserves) of less than 2.5% of carried reserves and completion of the ongoing disposition of the Nuveen shares (with proceeds downstreamed to the insurance operations) would likely result in a stable outlook. Conversely, failure to meet some or all of these expectations could lead to a downgrade of St. Paul Travelers' ratings.

The following ratings have been upgraded and now have a negative outlook:

Members of the legacy Gulf intercompany pool -

Gulf Insurance Company - insurance financial strength to Aa3 from A2;

Gulf Underwriters Insurance Company -- insurance financial strength to Aa3 from A2;

Atlantic Insurance Company -- insurance financial strength to Aa3 from A2;

Select Insurance Company - insurance financial strength to Aa3 from A2;

Members of the legacy St. Paul intercompany pool -

St. Paul Fire and Marine Insurance Company -- insurance financial strength to Aa3 from A1;

St. Paul Surplus Lines Insurance Company -- insurance financial strength to Aa3 from A1;

Athena Assurance Company -- insurance financial strength to Aa3 from A1;

St. Paul Medical Liability Insurance Company -- insurance financial strength to Aa3 from A1;

Rated member of the USF&G intercompany pool:

United States Fidelity and Guaranty Company -- insurance financial strength to Aa3 from A2;

as well as other supported subsidiaries:

Travelers Casualty and Surety Company of Europe, Limited -- insurance financial strength to Aa3 from A1.

St. Paul Reinsurance Company Limited -- insurance financial strength to Aa3 from A1;

The rating of Gulf Insurance Company will be withdrawn, following the completion of its legal merger with Travelers Indemnity Company. The upgrades of both the Travelers Casualty and Surety Company of Europe, Limited and St. Paul Reinsurance Company Limited reflect the continuing reinsurance support from Aa3 affiliated companies.

The following ratings have been affirmed with a negative outlook:

The St. Paul Travelers Companies Inc. -- senior unsecured debt at A3, prospective senior unsecured debt at (P)A3, prospective subordinated debt at (P)Baa1, prospective preferred stock at (P)Baa2; rating for commercial paper at Prime-2;

Travelers Property Casualty Corporation -- senior unsecured debt at A3, subordinated debt at Baa1;

Travelers Insurance Group Holdings, Inc. -- senior unsecured debt at A3;

USF&G Corporation -- senior unsecured debt at A3, backed senior debt at A3, backed subordinated debt at Baa1;

MMI Companies, Inc. --junior subordinated debt at Baa1;

St. Paul Capital Trust I -- backed preferred securities at Baa1;

St. Paul Capital Trust II -- backed preferred securities at Baa1;

USF&G Capital I -- backed preferred securities at Baa1;

USF&G Capital II -- backed preferred securities at Baa1;

USF&G Capital III -- backed preferred securities at Baa1;

MMI Capital Trust I -- preferred securities at Baa1;

Members of the legacy Travelers Indemnity Company group intercompany pool:

Travelers Casualty and Surety of America - insurance financial strength at Aa3;

Automobile Insurance Company of Hartford -- insurance financial strength at Aa3;

Charter Oak Fire Insurance Company - insurance financial strength to 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 to 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 Insurance Company - insurance financial strength at Aa3.

The St. Paul Travelers Companies, Inc. (NYSE: STA) is one of the largest property casualty insurers in the U.S. and is engaged through its subsidiaries in both commercial and personal lines property casualty insurance. For the first quarter of 2005, St. Paul Travelers reported net premiums written of $5.2 billion and net income of $212 million ($877 million from continuing operations). Shareholders' equity as of March 31, 2005 was $20.3 billion. St. Paul Travelers is comprised of the legacy The St. Paul Companies, Inc. and subsidiaries (St. Paul, MN) and the legacy Travelers Property Casualty Corp. and subsidiaries (Hartford, CT).

Moody's insurance financial strength ratings are opinions of the ability of insurance companies to repay punctually senior policyholder claims and obligations. For more information, visit our website at www.moodys.com/insurance.

New York
Alan Murray
VP - Senior Credit Officer
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Robert Riegel
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
© 2020 Moody's Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH  CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND  OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES  ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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