Travelers 2010 Annual Report Download - page 39

A downgrade in one or more of the Company’s claims-paying ratings could negatively impact the
Company’s business volumes and competitive position because demand for certain of its products may
be reduced, particularly because many customers require that the Company maintain minimum ratings
to enter into or renew business with it.
Additionally, a downgrade in one or more of the Company’s debt ratings could adversely impact
the Company’s ability to access the capital markets and other sources of funds, including in the
syndicated bank loan market, and/or result in higher financing costs. For example, downgrades in the
Company’s debt ratings could result in higher interest expense under the Company’s revolving credit
agreement (under which the cost of borrowing could range from LIBOR plus 100 basis points to
LIBOR plus 175 basis points, depending on the Company’s debt ratings), the Company’s commercial
paper program, or in the event that the Company were to access the capital markets by issuing debt or
similar types of securities. See ‘‘Item 7—‘‘Management’s Discussion and Analysis of Financial
Condition and Results of Operations-Liquidity and Capital Resources’’ for a discussion of the
Company’s revolving credit agreement and commercial paper program. The Company considers the
level of increased cash funding requirements in the event of a ratings downgrade as part of the
evaluation of the Company’s liquidity requirements. The Company currently believes that a one- to
two-notch downgrade in its debt ratings would not result in a material increase in interest expense
under its existing credit agreement and commercial paper programs. In addition, the Company
considers the impact of a ratings downgrade as part of the evaluation of its common share repurchases.
Claims—Paying Ratings
The following table summarizes the current claims-paying (or financial strength) ratings of the
Travelers Reinsurance Pool, Travelers C&S Co. of America, Travelers Personal single state companies,
Travelers C&S Co. of Europe, Ltd., Travelers Guarantee Company of Canada and Travelers Insurance
Company Limited as of February 17, 2011. The table also presents S&P’s Lloyd’s Syndicate Assessment
rating for Travelers Syndicate Management Limited—Syndicate 5000. The table presents the position of
each rating in the applicable agency’s rating scale.
A.M. Best Moody’s S&P Fitch
Travelers Reinsurance Pool(a)(b) ........ A+ (2
nd of 16) Aa2 (3rd of 21) AA (4th of 21) AA (3rd of 21)
Travelers C&S Co. of America .......... A+ (2
nd of 16) Aa2 (3rd of 21) AA (4th of 21) AA (3rd of 21)
First Floridian Auto and Home Ins. Co. . . . A (4th of 16) — — AA (3rd of 21)
First Trenton Indemnity Company ....... A (3
rd of 16) — — AA (3rd of 21)
The Premier Insurance Company of
Massachusetts ................... A (3
rd of 16) — — —
Travelers C&S Co. of Europe, Ltd. ...... A+ (2
nd of 16) Aa2 (3rd of 21) AA (4th of 21) —
Travelers Guarantee Company of Canada . . A+ (2nd of 16) — — —
Travelers Insurance Company Limited ..... A (3
rd of 16) — AA (4th of 21) —
Travelers Syndicate Management
Limited—Syndicate 5000 ............ — — 3 (9th of 15) —
(a) The Travelers Reinsurance Pool consists of: The Travelers Indemnity Company, The Charter Oak Fire
Insurance Company, The Phoenix Insurance Company, The Travelers Indemnity Company of Connecticut,
The Travelers Indemnity Company of America, Travelers Property Casualty Company of America, Travelers
Commercial Casualty Company, TravCo Insurance Company, The Travelers Home and Marine Insurance
Company, Travelers Casualty and Surety Company, Northland Insurance Company, Northfield Insurance
Company, Northland Casualty Company, American Equity Specialty Insurance Company, The Standard Fire
Insurance Company, The Automobile Insurance Company of Hartford, Connecticut, Travelers Casualty
Insurance Company of America, Farmington Casualty Company, Travelers Commercial Insurance Company,
Travelers Casualty Company of Connecticut, Travelers Property Casualty Insurance Company, Travelers
Personal Security Insurance Company, Travelers Personal Insurance Company, Travelers Excess and Surplus
Lines Company, St. Paul Fire and Marine Insurance Company, St. Paul Surplus Lines Insurance Company,
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