Standard and Poor Places Travelers’ Gulf Cos. on Negative Watch

May 30, 2002

Standard & Poor’s affirmed its single-‘A’-minus counterparty credit and senior debt ratings on Travelers Property Casualty Corp. (Travelers) and its double-‘A’-minus counterparty credit and financial strength ratings on some members of the Travelers Property Casualty Pool due to the pool’s very strong and diversified business position and very strong operating results and capitalization, and the current hardening pricing trend of the commercial lines market. It also said the outlook is stable.

S&P also said it placed its single-‘A’-minus counterparty credit and financial strength ratings on some of the pool’s Gulf companies on CreditWatch negative following Travelers’ recent announcement that Trident II LP will invest $125 million in the insurers. These companies will be removed from the Travelers pool.

“The events surrounding the Gulf companies raise questions about their long-term strategic importance to Travelers. S&P intends to further review on a stand-alone basis the concerned Gulf companies,” noted S&P credit analyst Michael Gross.

The Gulf companies in question are Gulf Insurance Co., Atlantic Insurance Co., Gulf Group Lloyds, Gulf Underwriters Insurance Co., and Select Insurance Co. The affirmation of the financial strength ratings on the members of the Travelers Property Casualty Pool are based on the pool’s very strong operating results and capitalization and the current hardening pricing trend in the commercial lines market.

Citigroup Inc. is expected to dividend the majority of its remaining ownership in Travelers Property & Casualty Corp. to Citigroup shareholders by year-end 2002. Standard & Poor’s expects Travelers to maintain competitive market share in the commercial and personal lines. Premium growth should increase by at least 15 percent in 2002, driven largely by significant rate increases in the commercial lines sector. Capital strength is expected to be maintained at least at the double-‘A’ rating level, with consolidated debt leverage for Travelers Property & Casualty to be 25 percent or less.

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