Travelers Property Casualty Corp. Ratings Lowered

Standard & Poor’s lowered its senior debt and preferred stock ratings on Travelers Property Casualty Corp. to “A-” and “BBB”, respectively, from “A+” and “A-.” At the same time, S&P affirmed its “AA-” counterparty credit and financial strength ratings on the members of the Travelers Property Casualty Pool. The outlook is stable.

These rating actions reflect a recent announcement by Citigroup Inc. that it intends to spin-off its Travelers property/casualty operations in 2002. The prior senior debt and preferred stock ratings on Travelers Property Casualty Corp. had reflected the benefits inherent in being a member of Citigroup, including material financial flexibility. The ratings adjustments reflect standard rating notching between the holding company and its regulated operating insurance companies on a stand-alone basis.

According to S&P, the ratings on Citigroup and its other units will not be affected by the spin-off of the property/casualty insurance business. The spin-off is a logical strategic move for a company that wants to focus on high-growth and higher-return businesses. The property/casualty operations accounted for only about 8 percent of Citigroup’s earnings. Although they added meaningfully to diversification because of their low correlation with banking businesses, they did not yield many opportunities for synergies.