A.M. Best Downgrades Ratings of Travelers; Affirms Ratings of St. Paul and Equalizes Respective Debt Ratings.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--April 2, 2004

A.M. Best Co. has downgraded the financial strength rating to A+ (Superior) from A++ (Superior) of Travelers Property Casualty Pool (Travelers PC Pool) (Hartford, CT). The rating has been removed from under review and assigned a stable outlook. Concurrently, A.M. Best has affirmed the financial strength rating of A (Excellent) of the St. Paul Companies (St. Paul, MN). This rating has been removed from under review and assigned a positive outlook.

A.M. Best has also downgraded the debt ratings to "a" from "aa-"on senior and to "a-" from "a+" on subordinated notes issued by Travelers Property Casualty Corp. (Travelers) and Travelers Insurance Group Holdings, Inc. These ratings have been removed from under review and assigned stable outlooks. Additionally, A.M. Best has upgraded the debt ratings to "a" from "bbb+" on senior, to "a-" from "bbb" on subordinated, to "bbb+" from "bbb-"on trust preferred securities, to "bbb+" from "bbb-"on preferred stock and to AMB-1 from AMB-2 on the commercial paper program of the former The St. Paul Companies, Inc. (St. Paul), now known as The St. Paul Travelers Companies, Inc. (NYSE: STA) (St. Paul, MN). These ratings have also been removed from under review and assigned stable outlooks.

These rating actions follow the close of the merger of Travelers and St. Paul, and A.M. Best's review of the operating and financial impacts this merger will have on the Travelers PC Pool, St. Paul Companies and the combined holding companies.

The rating action on the Travelers PC Pool reflects its parent's merging with a lower-rated and more financially leveraged organization. Despite Travelers' strengths, the merger creates an organization with an overall increased risk profile with greater uncertainty as compared with Travelers, particularly with regard to reserve adequacy and earnings stability. Although Travelers' ratings have been downgraded, its highly disciplined underwriting and risk management and conservative investment management should result in continued superior operating performance and capitalization.

The affirmation of the St. Paul Companies' rating with a positive outlook recognizes its merging with a higher-rated and less financially leveraged organization. While A.M. Best continues to be concerned by the size and uncertainty associated with St. Paul's run-off businesses, as well as the adverse prior year loss reserve development reported from several of its core business segments, management's proactive and effective strategic actions undertaken since late 2001 have substantially improved the group's underwriting and operating performance on continuing lines of business and its prospects going forward.

The combined organization possesses significant market share, ranking second in the United States in commercial lines as well as in personal lines agency companies. A.M. Best expects the combined companies to benefit from cross-selling opportunities through the ability to offer complementary products, with Travelers being particularly strong in general commercial lines and St. Paul in specialty commercial lines. The merger also results in greater geographic spread and diversification of business, with Travelers' presence being particularly strong in the Northeast and East Coast and St. Paul in the Midwest and South. Furthermore, the merger should afford significant expense savings potential through integration.

Offsetting these positive factors are the challenges and risks of integrating the groups in terms of operations, systems and personnel. However, the management of both organizations has significant experience in this regard, having previously been involved in the successful merger of several other large insurance organizations. Moreover, concentrations of Travelers and St. Paul business within agencies may be a concern to those agencies preferring to produce business for a more diversified group of carriers.

Although the combined group is currently maintaining the Travelers PC Pool and St. Paul Companies as separate underwriting pools, A.M. Best expects that the financial strength ratings of the individual pools will converge over time as the operations are integrated.

The respective debt ratings assigned to the securities issued by Travelers and St. Paul have been equalized, reflecting the one common holding company, The St. Paul Travelers Companies, Inc., which is guaranteeing the outstanding securities of the issuers.

The ratings on Travelers' debt securities have been downgraded because of the moderately higher financial leverage of the combined companies and the potential for increased pressure to dividend earnings should St. Paul's earnings continue to exhibit volatility. Conversely, the ratings on St. Paul's debt securities have been upgraded because of the lower financial leverage of the combined companies and greater sources of cash flow to the holding company due the combined companies' earnings power and dividend capacity.

Based on proforma capitalization at December 31, 2003, financial leverage for the combined companies totaled 25% (including hybrid securities), which is five points higher than Travelers on a stand-alone basis and 15 points lower than St. Paul's significant leverage. Coming into the merger, Travelers' cash flow needs were quite manageable, while St. Paul's interest expense and shareholder dividends required subsidiary dividends close to or equal to subsidiary earnings capabilities.

Over the next several years, A.M. Best expects that financial leverage will be reduced toward the 20% level. The larger capital base of the combined companies, coupled with the expected earnings and dividend capability of the operating companies, should allow greater support of the financial leverage and cash flow needs.

For a comprehensive list of Travelers Property Casualty Corp. and St. Paul Companies' financial strength and debt ratings, please visit www.ambest.com/press/040201travelersstpaul.pdf.

For a list of A.M. Best's debt ratings, please visit http://www3.ambest.com/debtratings/.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.