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Rating Action:

Moody’s affirms Travelers’ ratings (A2 senior); outlook stable

01 November 2019

NOTE: On January 02, 2020, the press release was corrected as follows: in the list of the ratings that have been affirmed, the backed preferred shelf ratings for Travelers Capital II, III, IV and V were removed. Revised release follows.

New York , November 1, 2019 – Moody's Investors Service, ("Moody's") has affirmed the A2 senior debt ratings and Prime-1 commercial paper rating of The Travelers Companies, Inc. (NYSE: TRV) as well as the Aa2 insurance financial strength (IFS) ratings of its principal operating subsidiaries. The rating outlook for Travelers is stable. A complete list of rating actions is shown below.

RATINGS RATIONALE

According to Moody's, the affirmation of Travelers' ratings is based on the group's leading market position in US commercial, personal and specialty insurance lines of business as well as its strong position in the independent agency distribution channel serving middle market and small commercial customers. Additional strengths include its long record of core profitability, its high quality investment portfolio and strong internal liquidity, and its solid risk-adjusted capitalization and financial flexibility. Tempering these strengths are Travelers' underwriting and reserving exposures to long-tail casualty lines such as workers' compensation and general liability with their attendant sensitivities to litigation and inflation, exposure to natural and man-made catastrophes, as well as ongoing competitive conditions in personal automobile insurance.

For the first nine months of 2019, Travelers reported net income of $1.7 billion, a decline from $1.9 billion in the prior year period driven by higher combined ratios in certain commercial lines, higher non-catastrophe weather losses, and the cost of the company's new catastrophe reinsurance treaty. After-tax catastrophe losses were $632 million for the first nine months of 2019, lower than the $873 million in the prior year period. The combined ratio, which includes catastrophe losses, increased to 97.9% for the first nine months of 2019 from 96.8% in the prior year period because of adverse reserve development and higher current year loss ratios in general liability, professional liability and commercial auto. In response to rising claim severity in these commercial lines, Travelers has increased premium rates. Moody's expects that Travelers' disciplined enterprise view of risk will help it effectively manage the underwriting cycle coupled with declining investment yields to support its strong credit profile.

The stable outlook reflects the group's diversified businesses and its disciplined operational and financial management. The rating agency expects that Travelers will maintain strong holding company liquidity and capital and will balance the interests of creditors and shareholders in executing its share repurchase program.

The three notch spread between Travelers' A2 senior debt rating and the Aa2 insurance financial strength ratings of its principal operating subsidiaries is consistent with Moody's typical notching practice for US insurance holding company structures.

Factors that could lead to a ratings' upgrade include: adjusted financial leverage in the mid-teens percentage range; earnings coverage of interest and preferred dividends consistently above 10x; substantial reduction in gross catastrophe exposures; and substantial, if not complete, reduction in risk of further adverse reserve development from asbestos and environmental liabilities.

Conversely, factors that could lead to a ratings' downgrade include: equity capital declining by more than 5% as a result of net operating losses (e.g. through catastrophe or other underwriting losses) and/or realized investment losses; adjusted financial leverage meaningfully exceeding 25% of total capital and 30% of tangible capital on a sustained basis; pretax 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 or below 5x.

The following provisional shelf ratings have been assigned:

The Travelers Companies, Inc.:

- senior unsecured shelf at (P)A2;

- subordinated shelf at (P)A3;

- junior subordinated shelf at (P)A3;

- cumulative preferred stock at (P)Baa1;

- non-cumulative preferred stock at (P)Baa1.

The following ratings have been affirmed:

The Travelers Companies, Inc.:

- senior unsecured debt at A2;

- commercial paper at Prime-1;

- senior unsecured MTN program at (P)A2;

Travelers Property Casualty Corp. -- senior unsecured debt at A2;

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

USF&G Capital I, III -- backed preferred stock at A3 (hyb);

MMI Capital Trust I -- backed preferred stock at A3 (hyb);

The rating agency has affirmed the following Aa2 insurance financial strength ratings of Travelers' property & casualty insurance subsidiaries:

American Equity Specialty Insurance Company

The Automobile Insurance Co. of Hartford, CT

The Charter Oak Fire Insurance Co.

Discover Property & Casualty Insurance Company

Discover Specialty Insurance Company

Farmington Casualty Company

Fidelity and Guaranty Insurance Underwriters, Inc.

Gulf Underwriters Insurance Company

Northfield Insurance Company

Northland Casualty Company

Northland Insurance Company

The Phoenix Insurance Company

Select Insurance Company

St. Paul Fire and Marine Insurance Company

St. Paul Guardian Insurance Company

St. Paul Mercury Insurance Company

St. Paul Protective Insurance Company

St. Paul Surplus Lines Insurance Company

The Standard Fire Insurance Company

The Travelers Home and Marine Insurance Company

TravCo Insurance Company

Travelers Casualty and Surety Company

Travelers Casualty and Surety Company of America

Travelers Casualty and Surety Company of Europe, Ltd

The Travelers Casualty Company

Travelers Casualty Company of Connecticut

Travelers Casualty Insurance Company of America

Travelers Commercial Casualty Company

Travelers Commercial Insurance Company

Travelers Constitution State Insurance Company

Travelers Excess and Surplus Lines Company

The Travelers Indemnity Company

The Travelers Indemnity Company of America

The Travelers Indemnity Company of CT

Travelers Personal Insurance Company

Travelers Personal Security Ins Co

Travelers Property Casualty Co. of America

Travelers Property Casualty Insurance Company

United States Fidelity and Guaranty Company

The outlook for all rated entities remains stable.

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.

The Travelers Companies, Inc. (NYSE: TRV) is the sixth largest US property & casualty insurer and through its subsidiaries, provides a wide range of commercial and personal property and casualty insurance products and services to businesses, government units, associations and individuals, primarily through independent agents and brokers. The group operates throughout the United States, as well as in Canada, the United Kingdom, the Republic of Ireland, Brazil, and throughout other parts of the world as a corporate member of Lloyd's of London. For the first nine months of 2019, Travelers reported net written premiums of $22.1 billion and net income of $1.7 billion. Shareholders' equity as of September 30, 2019 was $25.6 billion.

The principal methodology used in these ratings was Property and Casualty Insurers published in May 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Michael Dion, CFA
VP-Senior Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Marc R. Pinto, CFA
MD-Financial Institutions
Financial Institutions Group
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Releasing Office :
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

© 2019 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 ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S 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 RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S 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. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S 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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Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for rating s opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

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

Related Issuers
American Equity Specialty Insurance Company
Automobile Insurance Co. of Hartford, CT, the
Charter Oak Fire Insurance Co., the
Discover Property & Cas.Ins.Company
Discover Specialty Insurance Company
Farmington Casualty Company
Fidelity & Guaranty Insurance Under., Inc.
Gulf Underwriters Insurance Company
MMI Capital Trust I
Northfield Insurance Company
Northland Casualty Company
Northland Insurance Company
Phoenix Insurance Company, the
Select Insurance Company
St. Paul Fire and Marine Insurance Company
St. Paul Guardian Insurance Company
St. Paul Mercury Insurance Company
St. Paul Protective Insurance Company
St. Paul Surplus Lines Insurance Company
Standard Fire Insurance Company, the
TravCo Insurance Company
Travelers Capital II
Travelers Capital III
Travelers Capital IV
Travelers Capital V
Travelers Casualty & Surety Co of Europe, Ltd
Travelers Casualty and Surety Co. of America
Travelers Casualty and Surety Company
Travelers Casualty Company of Connecticut
Travelers Casualty Company, the
Travelers Casualty Insurance Co. of America
Travelers Commercial Casualty Company
Travelers Commercial Insurance Company
Travelers Companies, Inc. (The)
Travelers Constitution State Insurance Co.
Travelers Excess and Surplus Lines Company
Travelers Home and Marine Insurance Co., The
Travelers Indemnity Company of America, The
Travelers Indemnity Company of CT, the
Travelers Indemnity Company, the
Travelers Insurance Group Holdings, Inc.
Travelers Personal Insurance Company
Travelers Personal Security Ins Co
Travelers Property Casualty Co. of America
Travelers Property Casualty Corp.
Travelers Property Casualty Insurance Company
United States Fidelity and Guaranty Company
USF&G Capital I
USF&G Capital III
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