Fitch Affirms Travelers' Ratings; Outlook Stable

Fitch Ratings has affirmed its ratings on The Travelers Companies, Inc. (NYSE:TRV), as follows:

--Issuer Default Rating (IDR) at 'A+';

--Senior unsecured notes at 'A';

--subordinated notes at 'A-';

--Insurer financial strength (IFS) on insurance company subsidiaries at 'AA'.

See the full list of rating actions below. The Rating Outlook is Stable.

The affirmations reflect TRV's ability to generate solid earnings and maintain its strong capitalization despite the current difficult economic environment. Fitch's expectation is that TRV will be able to sustain these favorable trends over the next 12-18 months despite challenging conditions in many of the company's business lines and the potential for further investment market turmoil.

TRV's recently reported full-year 2008 results included $2.9 billion of net income. While this is a 36% decline compared to the prior year, Fitch views it as a solid result given the large hurricane losses suffered by the industry in the third quarter and the significant effect of declining asset valuations on insurers' investment portfolios. TRV's 2008 net return on average equity was 11.4% a relatively strong result in the current environment.

Rating considerations that Fitch will consider closely going forward include:

--The credit quality of the company's large municipal bond portfolio in light of the current difficult financial conditions many states and municipalities are experiencing;

--The effect of reserve development on TRV's underwriting profitability, especially in light of the significant favorable effect reserve development had on the company's 2008 results;

--The potential for higher underwriting losses tied to the company's professional liability business.

Fitch continues to view TRV's investment portfolio as a high-quality and liquid portfolio with comparatively little exposure to problem asset classes such as mortgage backed securities with sub-prime or Alt-A collateral. The company's portfolio is dominated by municipal and corporate bonds and at year-end 2008 had a weighted average credit rating of 'AA+'. TRV's investment portfolio remains supportive of the company's current ratings under stress test scenarios where Fitch assumes credit related losses on the company's fixed income portfolio and asset valuation losses on the company's modest equity portfolio.

Other than a large catastrophe event which could generate sudden liquidity needs, Fitch views TRV's potential need for immediate liquidity as modest. Further, the high credit quality of the company's investment portfolio and reasonable asset duration, along with TRV's solid operating cash flow and $2.1 billion of liquid holding company assets provide significant liquidity.

TRV uses a moderate amount of financial leverage with a year-end 2008 debt-to-capital ratio of 20% and strong operating earnings-based interest coverage of 12.2 times (x) for the year. The company uses a reasonable amount of operating leverage and Fitch views its operating leverage ratios as materially unchanged in recent years. Fitch's expectation is that TRV will strive to manage its share repurchase program, under which it repurchased $2.1 billion of shares in 2008, such that its capitalization remains materially unchanged over the next 12-18 months.

The following ratings have been affirmed by Fitch, with a Stable Outlook:

The Travelers Companies, Inc.

--IDR at 'A+';

--Short-term IDR at 'F1'

--8.125% senior notes due 2010 at 'A';

--7.415% Medium-Term Notes due 2010 at 'A';

--5.375% senior notes due 2012 at 'A';

--5.50% senior notes due 2015 at 'A';

--6.25% senior notes due 2016 at 'A';

--5.75% senior notes due 2017 at 'A';

--5.80% senior notes due 2018 at 'A';

--6.75% senior notes due 2036 at 'A';

--6.25% senior notes due 2037 at 'A';

--6.25% junior subordinated debentures due 2037 at 'A-'

--$800 million commercial paper (CP) program at 'F1'.

MMI Capital Trust I

--7.625% Trust preferred due 2027 at 'A-'.

USF&G Capital Trust I

--8.5% Trust preferred due 2045 at 'A-'.

USF&G Capital Trust III

--8.312% Trust preferred due 2046 at 'A-'.

Travelers Insurance Group Holdings Inc.

--IDR 'A+';

--7.75% senior notes due 2026 at 'A'.

Travelers Property Casualty Corp.

--IDR 'A+';

--5.00% senior notes due 2013 at 'A';

--6.375% senior notes due 2033 at 'A';

USF&G Corporation

--Zero coupon convertible notes due 2009 at 'A-'

The IFS ratings of the following members of the Travelers Inter-company Pool have been affirmed at 'AA', with a Stable Outlook:

--St. Paul Fire and Marine Insurance Company

--The Travelers Indemnity Company

--Travelers Casualty and Surety Company

--The Phoenix Insurance Company

--The Standard Fire Insurance Company

--United States Fidelity and Guaranty Company

--Travelers Casualty Insurance Company of America

--Farmington Casualty Company

--The Automobile Insurance Company of Hartford, Connecticut

--The Travelers Indemnity Company of Connecticut

--The Charter Oak Fire Insurance Company

--St. Paul Surplus Lines Insurance Company

--The Travelers Indemnity Company of America

--St. Paul Protective Insurance Company

--Travelers Casualty Company of Connecticut

--Travelers Commercial Casualty Company

--Travelers Commercial Insurance Company

--St. Paul Mercury Insurance Company

--Travelers Property Casualty Company of America

--Travelers Property Casualty Insurance Company

--Athena Assurance Company

--St. Paul Medical Liability Insurance Company

--TravCo Insurance Company

--Travelers Excess and Surplus Lines Company

--The Travelers Home and Marine Insurance Company

--Travelers Personal Security Insurance Company

--Travelers Personal Insurance Company

--Discover Property & Casualty Insurance Company

--Discover Specialty Insurance Company

--Fidelity and Guaranty Insurance Underwriters, Inc.

--St. Paul Guardian Insurance Company

--American Equity Specialty Insurance Company

--Northfield Insurance Company

--Northland Insurance Company

--Northland Casualty Company

In addition, the IFS ratings of the following members of the Travelers Group have been affirmed at 'AA', with a Stable Outlook:

--Fidelity and Guaranty Insurance Company

--Select Insurance Company

--St. Paul Fire and Casualty Insurance Company

--The Travelers Lloyds Insurance Company

--Travelers Lloyds of Texas Insurance Company

--First Floridian Auto and Home Insurance Company

--First Trenton Indemnity Company

--Travelers Auto Insurance Co. of New Jersey

--Travelers Casualty and Surety Company of America

--Gulf Underwriters Insurance Company

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.