A.M. Best Upgrades Travelers Property and Casualty Group's Financial Strength Ratings; Assigns Initial Debt Ratings.

Business & Insurance Editors

OLDWICK, N.J.--(BUSINESS WIRE)--Nov. 3, 2000

A.M. Best Co. has upgraded the financial strength rating of the Travelers PC Pool, Hartford, CT, to A++ (Superior) from A+ (Superior).

The rating applies to the 20-member pool, led by the Travelers Indemnity Company, and three reinsured affiliates. The rating also applies to Travelers Casualty and Surety Insurance Company of America, which A.M. Best considers to be a core member of the Travelers Group. Concurrently, A.M. Best has assigned an "aa-" rating to the senior debt of Travelers Property Casualty Corp. ("Travelers P&C") and an "a+" rating to the trust preferred securities issued by Travelers P&C Capital I and II.

The ratings reflect Travelers P&C's dominant market profile, dramatically improved financial performance, superior capitalization, conservative capital management and focused management group. In addition, the ratings consider the implicit benefits the group derives from its strategic affiliation with Citigroup, a leading financial services company. Citigroup's diverse yet synergistic market profile, exceptional earnings capacity, strong capital base and management's vision significantly enhance Travelers P&C's operational and financial flexibility. Travelers P&C brings to the enterprise an extensive distribution platform and property and casualty operations that are largely uncorrelated with Citigroup's other business segments' risks. Travelers P&C accounts for approximately 16% of Citigroup's revenues and 11% of operating income.

On its own, Travelers P&C's significant franchise has contributed to its leading positions in the property/casualty industry as the third largest writer of commercial lines insurance and the second largest writer of personal lines insurance through independent agents. A.M. Best believes that additional cross-selling opportunities remain given the scope of Citigroup's worldwide customer base.

Travelers P&C's strategy emphasizes a profit-maximizing approach when underwriting its business, rather than premium volume or market share orientation. This disciplined underwriting approach has contributed to the overall profitability. Exceptionally strong earnings performance over the past three years is exemplified by GAAP operating ROA and ROE, both of which are significantly above industry norms. The ratios underscore Travelers P&C's effective expense management, catastrophe and asbestos and environmental (A&E) mitigation strategies and adherence to strict underwriting and reserving discipline. Aiding its excellent performance in the last several years have been the contribution of investment income that is derived from a strong capital base as well as the company's long-tail reserves. While prior year redundancies have led to releases in recent years and have positively affected operating results, the company's reserves have remained sound and provide more than adequate coverage.

Supported by its strong earnings base, Travelers P&C has exhibited excellent capitalization as it has methodically reduced financial leverage from its peak level in 1996 when it acquired Aetna's property and casualty operations. The company's sustainable earnings provide ample fixed charge coverage that continues to improve. At the current level, A.M. Best does not expect debt plus preferred to capital to exceed 20% at Travelers P&C in the near to medium term, barring another significant acquisition.

Travelers P&C has been one of the few successful acquirers in the property casualty arena, with its largest transaction being Aetna's property and casualty operations in 1996. The company has achieved significant cost savings and provided the group with greater economies of scale, broadened its distribution capabilities and diversified its business mix. A.M. Best believes that the recent acquisition of the Reliance surety and fidelity operations will strengthen Travelers P&C's underwriting performance and give the company a leading position in surety lines. Likewise the small but profitable property and casualty operations that will be gained from the acquisition of Associates First Capital will also enhance underwriting results.

These favorable considerations are tempered by Travelers P&C's exposure to A&E and other cumulative injury claims (CIOTA) as well as intense competitive market conditions. Travelers P&C has aggressively pursued policy buyouts to remove future liabilities, exhibiting high indemnity payments and lower survival ratios. To date, 84% of known environmental liabilities have been resolved; however the asbestos exposure remains an issue as legal and legislative actions continue to develop. A.M. Best believes that Travelers P&C's A&E and CIOTA reserves have been conservatively estimated and that the group will continue to be proactive in addressing any adverse development trends.

While premium rates have shown signs of improving in many segments of the commercial lines marketplace, personal lines premium rates, which have historically been strong, are now exhibiting some weakening, particularly in auto lines. However, on an overall basis, A.M. Best expects Travelers P&C to sustain double-digit pretax operating returns in the foreseeable future and has assigned a stable outlook to the company's rating.

Travelers Property Casualty Corp., headquartered in Hartford, Connecticut, is an insurance holding company which, through its subsidiaries, provides a broad array of commercial and personal property and casualty insurance products to a diverse group of retail and commercial clients. At September 30, 2000, the company reported GAAP assets of $53.0 billion and shareholders' equity of $ 11.1 billion.

The following ratings on existing debt securities have

been assigned:

Travelers Property Casualty Corp.

-- "aa-" rating on $500 million 6.75% Notes, due 2001;

-- "aa-" rating on $150 million 6.75% Notes, due 2006;

-- "aa-" rating on $200 million 7.75% Notes, due 2026.

Travelers P&C Capital I

-- "a+" rating on $800 million 8.08% Guaranteed Trust

Preferred Securities, due 2036

Travelers P&C Capital II

-- "a+" rating on $100 million 8.00% Guaranteed Trust

Preferred Securities, due 2036

The group financial strength rating of Travelers Property

and Casualty Pool and Travelers Casualty and Surety

Insurance Company of America has been upgraded to A++

(Superior) from A+ (Superior).

Concurrently, A.M. Best has upgraded the financial

strength ratings for the following life insurance

affiliates to A++ (Superior) from A+ (Superior):

-- Travelers Insurance Co

-- Travelers Life & Annuity Co

-- Primerica Life Insurance Co

-- National Benefit Life Insurance Co

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.