Travelers Downgraded; St. Paul Affirmed

A.M. Best Co. downgraded the financial strength rating to “A+” (superior) from “A++” (superior) of Travelers Property Casualty Pool based in Hartford, Conn. The rating has been removed from under review and assigned a stable outlook. Concurrently, Best affirmed the financial strength rating of “A” (excellent) of the St. Paul Companies headquartered in St. Paul, Minn. This rating has been removed from under review and assigned a positive outlook.

These rating actions follow the close of the merger of Travelers and St. Paul, now known as The St. Paul Travelers Companies Inc., and Best’s review of the operating and financial impacts this merger will have on the Travelers PC Pool, St. Paul Companies and the combined holding companies.

The rating action on the Travelers PC Pool reflects its parent’s merging with a lower-rated and more financially leveraged organization. Despite Travelers’ strengths, the merger creates an organization with an overall increased risk profile with greater uncertainty as compared with Travelers, particularly with regard to reserve adequacy and earnings stability. Although Travelers’ rating has been downgraded, its highly disciplined underwriting and risk management and conservative investment management should result in continued superior operating performance and capitalization.

The affirmation of the St. Paul Companies’ rating with a positive outlook recognizes its merging with a higher-rated and less financially leveraged organization. While Best continues to be concerned by the size and uncertainty associated with St. Paul’s run-off businesses, as well as the adverse prior year loss reserve development reported from several of its core business segments, management’s proactive and effective strategic actions undertaken since late 2001 have substantially improved the group’s underwriting and operating performance on continuing lines of business and its prospects going forward.