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A.M. Best affirmed the issuer credit rating (ICR) and senior debt ratings of “a” of The Travelers Companies, Inc. (TRV - Analyst Report).
The credit rating agency also reiterated the financial strength ratings (FSR) of A+ (Superior) and ICR of “aa” of Travelers Group, its property/casualty members, and affiliate, Travelers Casualty and Surety Company of America (TCSA) and TCSA's affiliate and Travelers Casualty and Surety Company of Europe Limited (TCSCE). The outlook remains stable.
The affirmation came on the back of Travelers' solid operating and underwriting results, strong risk-adjusted capitalization, favorable market profile in commercial and personal lines and financial flexibility and liquidity. The ratings also consider Travelers’ product and geographic diversification, underwriting and financial discipline and conservative investment portfolio.
However, the insurer's exposure to emerging asbestos and environmental claims and natural and man-made catastrophes, added to a competitive environment within the property/casualty markets are partial offset to the positive factors.
The ratings of TCSA and TCSCE are affirmed based on TCSA’s solid risk-adjusted capitalization, strong underwriting and operating performance, conservative investment portfolio and dominant position in the surety and fidelity segments. However, TCSA’s limited product diversification and competitive property/casualty markets somewhat dwarfed the positives.
Furthermore, A.M. Best affirmed the ICR of “aa-” and FSR of A+ (Superior) of Travelers Guarantee Company of Canada. The outlook for ICR was upgraded to positive from stable while the outlook for FSR remains stable.
The rating agency affirmed the ratings on the heels of superior risk-adjusted capitalization, continued underwriting and operating profitability, dominant brand positioning and outstanding business profile as a specialty lines writer in the surety and corporate management liability segments.
However, heightened competition and soft macro conditions that continue to linger are partial offsets. Albeit, the company has the ability to weather these headwinds.
Concurrently the rating agency affirmed the FSR of A (Excellent) and ICR of “a+” of The Premier Insurance Company of Massachusetts and the FSR of A (Excellent) and ICR of “a” of First Trenton Indemnity Company. Also, A.M. Best has affirmed the FSR of A- (Excellent) and ICR of “a-” of First Floridian Auto and Home Insurance Company. The outlook remains stable.
The rating agency affirmed the ratings of The Premier Insurance Company of Massachusetts based on its solid risk-adjusted capitalization and sustained operating profitability, partially offset by geographic concentration of business in Massachusetts and limited product diversification coupled with the uncertainties associated with the recent automobile insurance reform in Massachusetts, leading to heightened competition and an adverse impact on underwriting and operating results.
The ratings of First Trenton Indemnity Company, First Floridian Auto and Home Insurance Company were affirmed based on its sufficient risk-adjusted capitalization and continued operating performance and benefits derived from its local market presence. These positives, however, are partly offset by the exposure to catastrophe losses and single state geographic concentration, as well as the increased volatility in underwriting and operating results.
We maintain our Neutral recommendation on Travelers. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the shares over the near term.
Based in New York, The Travelers Companies, through its subsidiaries, provides a wide variety of property and casualty insurance and surety products and services to businesses, organizations and individuals in the United States and in selected international markets. It competes with Hartford Financial Services Group Inc. (HIG - Analyst Report) and W.R. Berkley Corporation (WRB - Analyst Report).