S&P Downgrades Travelers P/C Corp.

Standard & Poor’s lowered its senior debt and preferred stock ratings on Travelers Property Casualty Corp. from “A+” and “A-” to “A” and “BBB,” respectively. At the same time, S&P affirmed its “AA-” counterparty credit rating and financial strength rating (FSR) on the members of the Travelers Property Casualty Pool. The outlook is stable.

The rating actions reflect the announcement by Citigroup Inc. that it intends to spin-off its Travelers property/casualty operations in 2002. The prior senior debt and preferred stock ratings on Travelers Property Casualty Corp. had reflected the benefits inherent in being a member of Citigroup, including material financial flexibility. The ratings adjustments reflect standard rating notching between the holding company and its regulated operating insurance companies on a stand-alone basis.

The ratings on Citigroup and its other units will not be affected by the spin-off of the property/casualty insurance business. According to S&P, the spin-off is a logical strategic move for a company that wants to focus on high-growth and higher-return businesses. The property/casualty operations accounted for only about 8 percent of Citigroup’s earnings. Although they added meaningfully to diversification because of their low correlation with banking businesses, they did not yield many opportunities for synergies.