Best Affirms Travelers ‘A+’ Ratings

June 4, 2008

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A+’ (Superior) and issuer credit ratings (ICR) of “aa-” of Travelers Insurance Companies and its P/C members. Best also affirmed the debt ratings of “a-” on senior debt, “bbb+” on subordinated debt, “bbb+ and “bbb” on junior subordinated debt, “bbb” on trust preferred securities, “bbb” on preferred stock and AMB-1 on commercial paper of The Travelers Companies, Inc.

Other ratings affirmed by Best included: the FSR of ‘A+’ (Superior) and ICRs of “aa-” of Travelers Casualty and Surety Company of America and its affiliate, Travelers Casualty and Surety Company of Europe, Limited (UK); the FSR of ‘A ‘(Excellent) and ICR of “a+” of The Premier Insurance Company of Massachusetts; the FSR of ‘A ‘(Excellent) and ICR of “a” of Travelers of New Jersey Group and its P/C members, and the FSR of ‘A-‘ (Excellent) and ICR of “a-” of First Floridian Auto and Home Insurance Company. The outlook for all these ratings is stable.

The affirmation of Travelers’ ratings “reflects its strong risk-adjusted capitalization, proactive and comprehensive risk management, superior earnings power, dominant market profile in commercial and personal lines and quality management team,” said Best. “The ratings also acknowledge the group’s continuing underwriting and financial discipline, geographic and product diversification, superior technology, which has improved its underwriting effectiveness and ability to service its agents and customers, and enhanced internal information systems.”

Best also indicated: “Particularly noteworthy has been Travelers’ strong equity accumulation from robust earnings—including reserve redundancies—over the past several years, substantial decline in underwriting leverage, solid retention rates, relatively conservative investment portfolio and mix of business that appears to have served the group well in the current soft pricing environment.

“The equity accumulation has allowed Travelers Companies, Inc.’s stock repurchase program to continue uninterrupted and provided management with the ability to right size capital levels.”

In addition Best said the ratings “consider the financial flexibility provided by Travelers Companies, Inc. The company’s liquidity is significant, with $1.5 billion of liquid funds at March 31, 2008, which is net of sizable common stock repurchases in 2006, 2007 and continuing in 2008.”

Best said it “believes the holding company will maintain liquid funds in excess of $1.0 billion throughout 2008. Its debt-to-total capital, which stood at 18.5 percent at March 31, 2008, is expected to be maintained at approximately 20 percent,” which is well within Best’s guidelines for the current ratings. “Given the strong risk-adjusted capitalization of Travelers and its favorable, albeit lower, earnings outlook in the near term—absent the unknown effect of catastrophes,” Best said it believes the “holding company is well positioned to achieve its capital management plans in 2008.”

However, Best singled out the “volatility of Travelers’ asbestos and environmental (A&E) reserves prior to 2006,” as an offsetting factor. Although the rating agency also indicated that “in years 2005-2007, overall commercial lines reserves excluding A&E appear to have stabilized, while redundancies have mainly occurred in personal lines reserves.

“Furthermore, being among the largest commercial insurers and national property writers, Travelers has significant exposure to natural catastrophes and potential terrorist-related losses, although it has comprehensive and active programs in place to manage its spread of risk and overall exposure.”

For a complete list of The Travelers Companies, Inc.’s FSRs, ICRs and debt ratings, go to:

Source: A.M. Best –

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