A.M. Best Affirms Ratings of Travelers Insurance Company Limited

  A.M. Best Affirms Ratings of Travelers Insurance Company Limited

Business Wire

LONDON -- November 21, 2012

A.M. Best Europe – Rating Services Limited has affirmed the financial strength
rating of A (Excellent) and issuer credit rating of “a+” of Travelers
Insurance Company Limited (TICL) (United Kingdom). The outlook for both
ratings is stable.

A.M. Best expects TICL to maintain excellent stand-alone risk-adjusted
capitalisation in 2012, supported by an increase in retained earnings. The
ratings also continue to factor in the explicit parental support, which is in
the form of a guarantee provided by St. Paul Fire and Marine Insurance Company
(SPFM), a subsidiary of its ultimate parent, The Travelers Companies, Inc.
(Travelers) [NYSE: TRV], for all TICL liabilities arising from underwriting

Pre-tax profit is expected to be lower in 2012 than the GBP 44.5 million
reported in 2011, primarily due to lower investment earnings. The technical
result is expected to benefit from prior year reserve releases, albeit lower
than GBP 17.4 million released in 2011. In spite of this, an underwriting loss
is anticipated, with the company’s expense ratio expected to remain high,
reflecting a reduction in premium income following its exit from personal
lines business in Ireland, as well as high operating costs associated with
significant investment in infrastructure. Investment income from the company’s
high quality investment portfolio is expected to offset the underwriting loss.
In 2011, the combined ratio deteriorated to 105% (2010: 102%), with an
improved loss ratio offset by higher management expenses.

TICL has a good business profile in its core UK market as a specialist
underwriter of liability and commercial property business. The company’s
profile also benefits from the strong brand name recognition of Travelers.
TICL is Travelers’ main underwriting operation in the United Kingdom and
Ireland. Following the termination of personal lines business in Ireland,
overall gross written premiums in 2011 decreased by 13% to GBP 278 million and
is likely to decrease by approximately 5% in 2012. Growth in the near term
will be constrained by competitive market conditions, although modest rate
increases are being achieved in UK commercial lines.

Positive rating actions are unlikely in the near future for TICL, whereas
unexpected weak operating performance, a material deterioration in its
risk-adjusted capitalisation, or deterioration in explicit group support could
lead to negative rating pressure.

The methodology used in determining these ratings is Best’s Credit Rating
Methodology, which provides a comprehensive explanation of A.M. Best’s rating
process and contains the different rating criteria employed in the rating
process. Key criteria utilised include: “Risk Management and the Rating
Process for Insurance Companies”; “Understanding BCAR for Property/Casualty
Insurers”; “Natural Catastrophe Stress Test Methodology”; “Understanding
Universal BCAR”; and “Rating Members of Insurance Groups”. Best’s Credit
Rating Methodology can be found at www.ambest.com/ratings/methodology.

In accordance with Regulation (EC) No. 1060/2009, the following is a link to
required disclosures: A.M. Best Europe - Rating Services Limited Supplementary

A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best
Company. Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more information,
visit www.ambest.com.

       Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.


A.M. Best Company, Inc.
Reza Pakravan
Financial Analyst
+(44) 20 7397 0293
Catherine Thomas
Director, Analytics
+(44) 20 7397 0281
Rachelle Morrow
Senior Manager, Public Relations
+(1) 908 439 2200, ext. 5378
Jim Peavy
Assistant Vice President, Public Relations
+(1) 908 439 2200, ext. 5644
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