Travelers Affirmed; Outlook Neg.

February 10, 2003

S&P’s affirmed its “A-” counterparty credit and senior debt ratings on Hartford, Conn.-based Travelers Property Casualty Corp., following an announcement that the company will take an after-tax charge of $1.3 billion in the fourth quarter 2002 to strengthen asbestos reserves. S&P’s also affirmed its “AA-” counterparty credit and financial strength ratings on the members of Travelers Property Intercompany Pool and Travelers Casualty and Surety Co. of America. The outlook on all these companies, collectively referred to as Travelers, remains negative.

The announcement followed a detailed study that evaluated Travelers’s current and anticipated asbestos claims and settlements. The charge, which is equal to almost all of 2002 operating earnings, will result in moderately below-average statutory capital strength relative to the current rating level and reduced financial flexibility because of actions taken to partially mitigate the gross cost of the reserving.

The negative outlook reflects Travelers’s moderately below-average statutory capital strength for the rating and reduced financial flexibility. Nevertheless, the insurer’s fundamental market positions and growth opportunities are expected to remain very strong. A significant increase in premium written for full-year 2002 and 2003 is expected, and operating earnings should remain very strong, with a combined ratio less than 100 percent.

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