Travelers Unchanged

A.M. Best Co. commented that the financial strength ratings of “A++” (superior) of Travelers Property Casualty Pool, the “aa-” senior debt and “a+” subordinated debt ratings of Travelers Property Casualty Corp. will not be affected by Travelers Property Casualty Group’s recently announced plans to purchase the renewal rights up to approximately $1.5 billion in net written premium from Royal & SunAlliance USA. These ratings apply to the 20-member pool, led by Travelers Indemnity Co., and its two reinsured affiliates. These ratings also apply to Travelers Casualty and Surety Co. of America and Travelers Casualty and Surety Company of Canada, which A.M. Best considers to be core and integral members of the Travelers Property Casualty Group. The outlook for all the ratings is stable.

Under the terms of the agreement, Travelers will purchase the renewal rights up to approximately $1.5 billion in personal, standard middle market commercial and national accounts premiums for a minimum of $25 million. The acquisition will increase Travelers access to distribution in its core business segments and is expected to be accretive to earnings in 2004, as the group re-underwrites the book of business and selectively renews accounts.

All in-force premium and existing loss reserves will remain the responsibility of R&SA USA, with no exposure to Travelers. Despite the size of this transaction, A.M. Best believes Travelers’ pro-forma capitalization (post-transaction) will remain commensurate with its current ratings and believes the strength of Travelers’ balance sheet and earnings will enable it to absorb this additional premium. However, this transaction increases Travelers’ operating leverage, which ultimately reduces Travelers’ overall capital flexibility.

Topics Casualty