Gulf, Affiliates on CreditWatch Neg

S&P announced that its “A+” counterparty credit and financial strength ratings on members of the Gulf Insurance Group—Gulf Insurance Co., Atlantic Insurance Co., Gulf Underwriters Insurance Co., Gulf Group Lloyds, and Select Insurance Co.—are remaining on CreditWatch with negative implications. These ratings were placed on CreditWatch on Nov. 17, 2003, when Travelers, which owns 83 percent of Gulf, announced the merger with St. Paul.

S&P decided to keep the ratings on CreditWatch following Travelers’s fourth-quarter 2003 earnings announcement, which indicated that Gulf took a substantial ($252 million pretax) reserve charge. This charge follows another substantial charge of $269 million in the first quarter of 2003. S&P considers Gulf’s current business position to be much weaker than its historical position because of continued adverse reserve development on its ongoing core and residual value businesses and poor operating results.

Offsetting these negative factors is the expectation of explicit support from Travelers in the form of a reinsurance agreement, Gulf’s strong capital adequacy and a continuation of strong rate increases in its ongoing specialty business.