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Announcement:

Moody's affirms Travelers Companies ratings (A2 senior unsecured); outlook stable

15 Oct 2010

New York, October 15, 2010 -- Moody's Investors Service has affirmed the ratings of The Travelers Companies, Inc. (NYSE: TRV) (senior unsecured debt at A2, commercial paper at Prime-1) and its insurance subsidiaries insurance financial strength ratings (IFS) at Aa2. The outlook for the ratings remains stable.

According to Moody's, the rating affirmations reflect Travelers' robust franchise in US personal, commercial and specialty property-liability lines of business, and its commanding presence in the independent agency distribution system, as well as its strong and sustained core operating performance, asset quality, and risk-adjusted capitalization measures. The rating agency added that Travelers' strong earnings and cash flow coverage measures and its ample holding company liquidity are also supportive of the rating.

Somewhat tempering these strengths are the company's exposure to cyclical pricing trends in the property/casualty insurance sector, exposures to underwriting losses arising from natural and man-made catastrophes, and continued general concerns related to the risk of further adverse loss development for runoff business and latent liabilities. Other risks include Travelers' exposure to potential underwriting losses in its management liability and surety business units as a result of ongoing stresses in the economy, although Moody's believes that the group's loss-control capabilities and a focus on certain less-exposed segments should continue to position it well.

Moody's senior analyst Alan Murray noted: "Travelers' excellent overall credit profile derives from the group's solid and diversified operational platform, from its attention to risk management discipline and from its sound financial footprint. Although the group's current configuration was built in prior years on multiple and sizeable acquisitions, management has been focused for some time on solidifying the group's market position in all of its major product segments and on generating growth internally."

Moody's current ratings reflect the expectation that financial leverage, adjusted for lease and under-funded pension obligations and uncollateralized letters of credit at Lloyd's, will remain below 25% and 30%, respectively, of total and tangible capital, that GAAP pre-tax earnings coverage of interest expense will exceed 10x, and that unencumbered dividend capacity -- exclusive of cash held at the holding company -- will cover annual interest expense and preferred dividends at a level of 5x or greater. Moody's noted that it expects that the company's share repurchase program will continue to be executed over time in an orderly fashion, and commensurate with prospective operating performance, so as not to result in sharp changes in the group's overall financial profile.

At Travelers' current rating levels, and given the intrinsic risk profile of the property-casualty insurance segment, a further rating upgrade is unlikely over the intermediate-term. However, factors that could contribute positively to Travelers' credit profile include the following: adjusted financial leverage in the mid teens; earnings coverage of interest and preferred dividends consistently above 10x; substantial reduction in gross catastrophe exposure; substantial, if not complete, reduction in risk of further adverse development from asbestos and environmental liabilities.

Factors that could lead to a rating downgrade include the following: equity capital declines by more than 10% as a result of operating losses; adjusted holding company debt exceeding 25% and 30%, respectively, of total capital and tangible capital on a sustained basis; pre-tax operating earnings coverage of interest expense below 8x; unencumbered dividend capacity -- exclusive of cash held at the holding company - coverage of annual interest expense and preferred dividends at a level of 5x or less.

The following debt ratings have been affirmed with a stable outlook:

The Travelers Companies Inc. -- senior unsecured debt at A2, provisional senior unsecured debt at (P)A2, provisional subordinated debt at (P)A3, provisional preferred stock at (P)Baa1; rating for commercial paper at Prime-1;

Travelers Capital II, III, IV and V -- backed provisional capital securities at (P)A3;

Travelers Property Casualty Corporation -- senior unsecured debt at A2;

Travelers Insurance Group Holdings, Inc. -- senior unsecured debt at A2;

USF&G Corporation -- senior unsecured debt at A2, backed subordinated debt at A3;

USF&G Capital I, III -- backed preferred securities at A3;

MMI Companies, Inc. -- junior subordinated debt at A3;

MMI Capital Trust I -- backed preferred securities at A3.

The following insurance financial strength ratings on U.S.-based members of the Travelers group of insurance companies have been affirmed at Aa2, all with a stable outlook:

Athena Assurance Company;

Automobile Insurance Company of Hartford;

Charter Oak Fire Insurance Company;

Farmington Casualty Company;

Gulf Underwriters Insurance Company;

Phoenix Insurance Company;

Select Insurance Company;

St. Paul Fire and Marine Insurance Company;

Travelers Medical Liability Insurance Company;

Travelers Surplus Lines Insurance Company;

Standard Fire Insurance Company;

Travelers Casualty and Surety Company;

Travelers Casualty Insurance Company of America;

Travelers Casualty and Surety of America;

Travelers Casualty Company of CT;

Travelers Commercial Insurance Company;

Travelers Indemnity Company;

Travelers Indemnity Company of America;

Travelers Indemnity Company of CT;

Travelers Property and Casualty Company of America;

Travelers Personal Security Insurance Company;

Travelers Personal Insurance Company;

Travelers Property Casualty Insurance Company;

United States Fidelity and Guaranty Company.

Additionally, the rating of Travelers Casualty and Surety Company of Europe, Limited has been affirmed at Aa2, reflecting the expectation of continuing support from rated affiliates.

Moody's has withdrawn the Aa2 IFS ratings of Atlantic Insurance Company and SPR Limited as these companies were sold.

The Travelers Companies, Inc. (NYSE: TRV) 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 and casualty insurance. Travelers reported net income of $1.3 billion for the first six months of 2010. Shareholders' equity as of June 30, 2010 amounted to $26.3 billion. Included in shareholders' equity were after-tax net unrealized investment gains of $2.4 billion.

The principal methodology used in rating The Travelers Companies, In. and its principal subsidiaries is Moody's Global Rating Methodology for Property and Casualty Insurers, published in May 2010 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating The Travelers Companies, Inc. can also be found in the Rating Methodologies sub-directory on Moody's website.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

Moody's insurance financial strength ratings are opinions of the ability of insurance companies to pay 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
MD - Insurance
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.

Moody's affirms Travelers Companies ratings (A2 senior unsecured); outlook stable
No Related Data.
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