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Rating Action:

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

29 April 2022


New York , April 29, 2022 – Moody's Investors Service has affirmed the A2 senior debt ratings and P-1 commercial paper rating of The Travelers Companies, Inc. ("Travelers", NYSE: TRV) as well as the Aa2 insurance financial strength (IFS) ratings of its principal operating subsidiaries. The rating outlook for Travelers is stable.

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.

As the sixth largest US P&C insurer, Travelers' size and scale, product breadth, and national presence are key competitive advantages. The company's broad product diversification, including its leading presence in surety coverages, as well as disciplined underwriting have produced healthy operating and underwriting returns over many years, with a combined ratio averaging in the mid-90s. Moody's 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.

For the first quarter of 2022, Travelers reported net income of $1.0 billion, up from $733 million in the prior year period driven by lower catastrophe losses and improved combined ratios in the business and bond and specialty segments, partially offset by lower underwriting margins in personal insurance, particularly personal auto. Pretax net catastrophe losses were $160 million for the first quarter, significantly lower than the $835 million in the prior year period. Travelers continues to increase premium rates in both personal auto and homeowners in response to rising claim severity trends.

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 AN UPGRADE OR DOWNGRADE OF THE RATINGS

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 ratings have been affirmed:

The Travelers Companies, Inc.: senior unsecured debt at A2; commercial paper at P-1; senior unsecured MTN program at (P)A2; senior unsecured shelf at (P)A2; subordinated shelf at (P)A3; junior subordinated shelf at (P)A3; cumulative preferred stock shelf at (P)Baa1; non-cumulative preferred stock shelf at (P)Baa1;

Travelers Property Casualty Corp. – backed senior unsecured debt at A2;

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

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

USF&G Capital 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

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 is stable.

Moody's has withdrawn the Aa2 insurance financial strength rating and stable outlook of Travelers Casualty and Surety Company of Europe, Ltd, which was dissolved in January 2020.

Please refer to the Moody's Investors Service Policy for Withdrawal of Credit Ratings, available on its website, www.moodys.com

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Property and Casualty Insurers Methodology published in September 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1254163 . Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

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 quarter of 2022, Travelers reported net written premiums of $8.0 billion and net income of $1.0 billion. Shareholders' equity as of March 31, 2022 was $25.5 billion.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

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.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

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

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

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

Sarah Hibler
Associate Managing Director
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

© 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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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 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