Fitch Ratings reiterated the Issuer Default Rating ("IDR") at
The Travelers Companies Inc.
) according to Reuters. Concurrently, it retained senior
unsecured notes at 'A' and subordinated notes at 'BBB+'. The
rating agency also affirmed the Insurer financial strength
("IFS") at 'AA' of the insurance subsidiaries. The ratings carry
a stable outlook.
The rating affirmations came on the back of Travelers dominant
market position with sustained solid earnings track record and a
prudent balance sheet. Despite an estimated loss of $650 million,
after tax and net of reinsurance from Superstorm Sandy, Fitch
expects Travelers to deliver better earnings in 2012 compared
with the year-ago level.
Travelers holds a dominant position by virtue of its array of
insurance products offered to both the commercial and personal
lines markets and also holds 5% market share of the
property/casualty industry in terms of net written premium.
Furthermore, it has an average return on equity of 12.2% over the
last 5 years.
The company's debt-to-capital ratio was 21.8% as on Sep 30, 2012,
within the credit rating agency's criteria. Also, the company
consistently buys back shares to return more value to its
However, Travelers has significant exposure to state, municipal
and revenue bonds, an asset class having higher stress level.
Nonetheless, the concern is dwarfed by credit quality and
considerable unrealized gain. Also, one-fifth of the municipal
bonds are escrowed, which lower credit risk considerably.
Rating affirmations or upgrades from credit rating agencies play
an important part in retaining investor confidence in the stock
as well as maintaining creditworthiness in the market. We believe
the company's strong score with the credit rating agencies will
help it write more business going forward.
The rating agency might consider a rating upgrade if Travelers
continues to deliver sturdy underwriting performances, which will
also outperform the industry and peers and maintain an
The ratings might be subject to downgrade if consolidated
statutory net leverage is more than 4.5x, debt-to-total capital
ratio to moves ahead of 25%, fixed charge coverage ratio falls
below 8x and there is a continued overhang of cat loss.
W.R. Berkley Corporation
), which closely competes with Travelers, also received rating
affirmation from another credit rating agency, A.M. Best
Co. The rating agency affirmed the ICR and debt ratings of
Travelers and Berkley both carry a Zacks #3 Rank, translating
into a short-term Hold rating and have a long-term Neutral
TRAVELERS COS (TRV): Free Stock Analysis
BERKLEY (WR) CP (WRB): Free Stock Analysis
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