Gulf Ratings Mixed

Standard & Poor’s Ratings Services affirmed its “A+” counterparty credit and financial strength ratings on Gulf Insurance Co. and the other members of Gulf Insurance Group (Gulf) and removed them from CreditWatch based on a fully executed guaranty provided by Travelers Indemnity Co., Gulf’s ultimate parent, which covers all of Gulf’s policyholders’ obligations.

S&P subsequently withdrew its counterparty credit ratings on the Gulf members because the guaranty only covers Gulf’s policyholders’ obligations. The outlook on Gulf is stable.

These ratings had been placed on CreditWatch in November 2003, following the merger announcement between Travelers and St. Paul companies. According to S&P, the stable outlook reflects the alignment of the ratings on Gulf with those on Travelers Indemnity Co. rather than Gulf’s stand-alone characteristics.

A.M. Best Co., however, downgraded its financial strength rating of the Gulf group to “A-” (excellent) from “A” (excellent).

At the same time Best upgraded the financial strength rating to “A+” (superior) from “A” (excellent) of Travelers Casualty and Surety of Europe Limited.

Best also noted that it removed the ratings on the companies from under review with developing implications and assigned stable rating outlooks.

Best said its rating actions contemplate the finalization of an unlimited financial guaranty provided by The Travelers Indemnity Company (Travelers Indemnity), the lead company of the Travelers Property Casualty Pool, to Gulf Insurance Company (Gulf Insurance), the lead company of Gulf. At the same time, an amendment to the Gulf inter-company pooling agreement is expected, eliminating Gulf Insurance’s retrocession to other pool affiliates.

In addition, all prior liabilities and obligations of Gulf’s pooled affiliates will be ceded to Gulf Insurance and thereby will provide all existing policyholders of Gulf the benefits of the guaranty.

Best indicated the guaranty to be provided by Travelers Indemnity is designed to alleviate any potential business disruption and policyholder concerns while in the process of transitioning Gulf’s business to other St. Paul Travelers’ affiliates during the balance of 2004 and in 2005.

In addition to the guaranty, Travelers Indemnity’s intent is to continue to fully support the liabilities of Gulf, which is further corroborated by its recent buyout of outside preferred shareholders (Trident II L.P.) and an additional $50 million capital contribution that it provided Gulf Insurance in June 2004.