Fitch Affirms St. Paul Travelers Ratings Following Asbestos Charge

NEW YORK--(BUSINESS WIRE)--Jan. 31, 2005--Fitch Ratings has affirmed the 'A-' long-term issuer and senior debt ratings of The St. Paul Travelers Companies, Inc. (STA), Travelers Property Casualty Corp. and Travelers Insurance Group Holdings. The 'AA-' insurer financial strength (IFS) ratings of the members of the Travelers Property Casualty Group (TPC) and St. Paul Fire and Marine Inter-company pool (SPC), which are rated on a group basis, have also been affirmed by Fitch. The Outlook for all ratings is Stable.

These actions follow today's announcement by STA that its fourth quarter 2004 earnings will include a $922 million pre-tax asbestos-related reserve charge and that the company is considering strategic alternatives to divest its 79% interest in Nuveen Investments (JNC).

The charge follows completion of the company's annual asbestos study and predominantly reflects increased loss cost projections due to elevated trial activity that has resulted in higher litigation costs in recent periods.

However, despite this most recent reserve charge, in excess of $400 million of after-tax catastrophe losses during the third quarter, and $1 billion of after-tax reserve strengthening in the second quarter, largely at SPC, STA will report 2004 after-tax operating income of approximately $1 billion, maintain consistent holding company liquidity and a post a moderate reduction in financial leverage during 2004.

While Fitch recognizes the pitfalls of using a survival ratio analysis at the company level, in large part due to numerous items that can distort claim payment data, it does provide a useful benchmark for comparison to peers. Since TPC significantly increased asbestos reserves during the fourth-quarter 2002, its adjusted three-year asbestos survival ratio has trended downward from 17x at year-end 2002 to 7x at year-end 2003 (11x proforma for the fourth quarter 2004 reserve charge). Fitch's benchmark survival ratio for the industry is 17.5x. However, given STA's aggressive claims settlement practices Fitch haircuts the benchmark for STA to roughly 13x. Utilizing this approach implies an asbestos reserve short-fall of roughly $1 billion, which is considered in Fitch's analysis of STA.

At Sept. 30, 2004, STA reported GAAP assets and shareholders' equity of $110 billion and $21 billion, respectively.

Entity/ Issue/Type             Action      Rating/Outlook

The St. Paul Fire and Marine Inter-company Pool (see below for list)

--Insurer financial strength   Affirm       'AA-'/Stable.

Travelers Property Casualty Group (see below for list)

--Insurer financial strength   Affirm       'AA-'/Stable.

The St. Paul Travelers Companies, Inc.

--Long-term issuer             Affirm        'A-'/Stable;

--7.13% senior notes due 2005  Affirm        'A-'/Stable;

--7.88% senior notes due 2005  Affirm        'A-'/Stable;

--5.75% senior notes due 2007  Affirm        'A-'/Stable;

--8.13% senior notes due 2010  Affirm        'A-'/Stable;

--$800 million CP              Affirm        'F2'.

St. Paul Capital Trust I

--7.6% Trust preferred         Affirm       'BBB+'/Stable.

MMI Capital Trust I

--7.625% Trust preferred       Affirm       'BBB+'/Stable.

USF&G Capital Trust I

--8.5% Trust preferred         Affirm       'BBB+'/Stable.

USF&G Capital Trust II

--8.47% Trust preferred        Affirm       'BBB+'/Stable.

USF&G Capital Trust III

--8.312% Trust preferred       Affirm       'BBB+'/Stable.

Travelers Insurance Group Holdings Corp.

--Long-term issuer             Affirm         'A-'/Stable;

--6.75% senior notes due 2006  Affirm         'A-'/Stable;

--7.75% senior notes due 2036  Affirm         'A-'/Stable.

Travelers Property Casualty Corp.

--Long-term issuer             Affirm         'A-'/Stable;

--3.75% senior notes due 2008  Affirm         'A-'/Stable;

--5% senior notes due 2013     Affirm         'A-'/Stable;

--6.375% senior notes due 2033 Affirm         'A-'/Stable;

--Convertible junior sub notes due 2032
                               Affirm        'BBB+'/Stable.

Members of the St. Paul Fire and Marine Inter-company Pool:

Athena Assurance Company
Discover Property & Casualty Insurance Company
Discover Specialty Insurance Company
Seaboard Surety Company
St. Paul Fire and Marine Insurance Company
St. Paul Medical Liability Insurance Company
St. Paul Protective Insurance Company
St. Paul Surplus Lines Insurance Company

Members of the Travelers Property Casualty Group:

The Automobile Insurance Company of Hartford
The Charter Oak Fire Insurance Company
Farmington Casualty Company
First Floridian Auto and Home Insurance Company
First Trenton Indemnity Company
The Phoenix Insurance Company
Red Oak Insurance Company
The Standard Fire Insurance Company
TravCo Insurance Company
The Travelers Casualty and Surety Company
Travelers Casualty & Surety Company of America
Travelers Casualty & Surety Company of Canada
Travelers Casualty and Surety Company of Illinois
Travelers Casualty Company of Connecticut
Travelers Commercial Insurance Company
Travelers Excess and Surplus Lines Ins. Co.
The Travelers Home and Marine Insurance Company
The Travelers Indemnity Company
The Travelers Indemnity Company of America
The Travelers Indemnity Company of Connecticut
The Travelers Indemnity Company of Illinois
Travelers Lloyd's Insurance Company
Travelers Lloyd's of Texas Insurance Company
The Travelers Indemnity Company of Missouri
Travelers Personal Security Insurance Company
Travelers Property Casualty Insurance Company
Travelers Property Casualty Insurance Company of Illinois