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Rating Action:

Moody's extends ratings to members of The Travelers Companies' intercompany pool (IFS at Aa2/stable)

30 Dec 2014

New York, December 30, 2014 -- Moody's Investors Service has assigned Aa2 insurance financial strength (IFS) ratings to 14 US-based subsidiaries of The Travelers Companies, Inc. (NYSE: TRV; senior unsecured at A2; stable outlook). The newly rated subsidiaries are members of the Travelers intercompany reinsurance pool. The outlook for the newly assigned ratings is stable, consistent with the outlook on the other currently Aa2-rated members of the pool.

RATINGS RATIONALE

According to Moody's, the rating assignments are based on each of the insurance subsidiaries' participation in the Travelers intercompany reinsurance pool. Under intercompany pooling agreements, each participant in the pool cedes its direct premiums and claim-related costs to the lead member of the pool, and takes back a pre-determined percentage of the pool's aggregate premiums and claim costs, as specified in the intercompany reinsurance pooling agreement. Although individual subsidiaries' operations may be focused on specific lines of business and/or geographic regions, by participating in a pooling agreement their net results of operations benefit from stability provided by the group's overall geographic, customer and line-of-business diversification.

Additionally, Moody's said the Aa2 IFS ratings consider Travelers' solid credit profile and position as one of the leading property & casualty (P&C) insurers in the US in many commercial, personal and specialty insurance lines of business, its strong track record of core profitability and internal capital generation, its high quality investment portfolio, its strong internal liquidity, and its solid risk-adjusted capitalization. Somewhat tempering these strengths are the company's underwriting exposures to long-tail casualty lines (such as workers' compensation and commercial general liability) with their attendant sensitivities to litigation and inflation, to losses arising from natural and man-made catastrophes, as well as continued competitive conditions - especially in the personal automobile line - and, to a lesser degree, potential for further adverse loss development for runoff business and latent liabilities.

Moody's analyst Alan Murray noted: "Travelers' strong 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. The group's solid position in the independent agency distribution channel and its product breadth across many standard and specialty coverages is also a key competitive strength."

Commenting on factors that could lead to a rating upgrade, Moody's noted that at Travelers' current rating level, and given the intrinsic risk profile of the diverse property-casualty insurance segments in which the insurer operates, a further rating upgrade is unlikely over the intermediate-term. However, factors that could contribute positively to Travelers' credit profile include the following: 1) adjusted financial leverage below 15%; 2) earnings coverage of interest and preferred dividends consistently above 10x; 3) substantial reduction in gross catastrophe exposure; and 4) substantial, if not complete, reduction in risk of further adverse development from asbestos and environmental liabilities. Conversely, factors that could lead to a rating downgrade include the following: 1) equity capital declines by more than 5% over a 1-year period as a result of operating losses (e.g. catastrophes or other underwriting losses) and/or realized investment losses; 2) adjusted holding company debt exceeding 25% and 30%, respectively, of total capital and tangible capital on a sustained basis; 3) pre-tax operating earnings coverage of interest expense below 8x; and 4) 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 insurance financial strength ratings on US-based members of the Travelers group of insurance companies have been assigned with a stable outlook:

American Equity Specialty Insurance Company -- insurance financial strength at Aa2;

Discover Property & Casualty Insurance Company -- insurance financial strength at Aa2;

Discover Specialty Insurance Company -- insurance financial strength at Aa2;

Fidelity and Guaranty Insurance Underwriters Inc. -- insurance financial strength at Aa2;

Northfield Insurance Company -- insurance financial strength at Aa2;

Northland Insurance Company -- insurance financial strength at Aa2;

Northland Casualty Company -- insurance financial strength at Aa2;

St. Paul Guardian Insurance Company -- insurance financial strength at Aa2;

St. Paul Mercury Insurance Company -- insurance financial strength at Aa2;

St. Paul Protective Insurance Company -- insurance financial strength at Aa2;

The Travelers Home and Marine Insurance Company -- insurance financial strength at Aa2;

TravCo Insurance Company -- insurance financial strength at Aa2;

Travelers Commercial Casualty Company -- insurance financial strength at Aa2;

Travelers Excess and Surplus Lines Company -- insurance financial strength at Aa2.

The Travelers Companies, Inc. is one of the largest property casualty insurers in the U.S. and is engaged through its subsidiaries in commercial, specialty and personal lines property and casualty insurance. Travelers reported net earned premiums of $17.7 billion and net income of $2.7 billion for the first nine months of 2014. Shareholders' equity as of September 30, 2014 amounted to $25.3 billion.

The principal methodology used in these ratings was Global Property and Casualty Insurers published in August 2014. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Moody's insurance financial strength ratings are opinions of the ability of insurance companies to pay punctually senior policyholder claims and obligations.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt 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 rating action on the support provider and in relation to each particular 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 rating action, and whose ratings may change as a result of this 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.

Alan Murray
Senior Vice President
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Robert L Riegel
MD - Insurance
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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

Moody's extends ratings to members of The Travelers Companies' intercompany pool (IFS at Aa2/stable)
No Related Data.
© 2021 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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​
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