Moody’s Lowers Travelers P/C Debt Ratings

April 1, 2004

Moody’s Investors Service announced that is has lowered the debt ratings of Travelers Property Casualty Corp., and those of its subsidiary Travelers Insurance Group Holdings Inc., by one notch.

Senior debt was lowered to “A3” from “A2” and junior subordinated debt to “Baa1” from “A3.” “This action concludes a review for downgrade of the company’s debt ratings which followed the announcement of a definitive merger agreement between Travelers Property Casualty Corp. and the St. Paul Companies. The transaction has received all the required regulatory and shareholder approvals, and is expected to close on April 1, 2004,” said Moody’s.

The bulletin added that “following this rating action, the outlook for the debt and financial strength ratings of Travelers Property Casualty Corp. and its rated affiliates, is stable.”

Moody’s said it “rates the members of the Travelers Indemnity Pool Aa3 for insurance financial strength with a stable outlook and rates the members of the St. Paul Fire & Marine Pool A1 for insurance financial strength, with a positive outlook.”

In its rationale for the downgrade, the rating agency noted the “higher financial leverage of the combined group, execution/ integration risk posed by the transaction, and elevated risk to the Travelers holding company as part of an organization that includes St. Paul’s relatively weaker operating insurers.”

Moody’s went on to explain that “this rating action, the priority of claim notching between Travelers’ debt and financial strength ratings now reflects a more typical three notch differential. Going forward, Moody’s ratings for the combined Travelers and St. Paul entities contemplate financial leverage below 30 percent, continued strong operating earnings, fixed charge coverage greater than 3 times interest and dividends, and no material acceleration in asbestos loss liabilities. The rating agency further noted that asbestos legislation that materially reduces future uncertainty about that risk could have a positive impact on Travelers/St. Paul ratings.”

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