S&P revises St. Paul Cos. watch to negative

Standard & Poor's said it revised the CreditWatch status of its BBB+ counterparty credit and debt ratings on the St. Paul Cos. Inc. and its A+ counterparty credit and financial strength ratings on St. Paul's insurance company subsidiaries to CreditWatch negative from CreditWatch developing.

The ratings on St. Paul were placed on CreditWatch on Nov. 17 following the company's announcement that its board of directors had approved a plan to merge with Travelers Property Casualty Corp. (A-/negative/--).

"The decision to revise the CreditWatch status to negative from developing reflects the latest assessment on the financial strength of St. Paul on a stand-alone basis," explained S&P credit analyst John Iten.

Should the merger with Travelers not go through as planned, S&P said it expects to lower the financial strength rating on St. Paul by one notch to A. St. Paul's senior and subordinated debt and preferred stock ratings would also be lowered by one notch.

"The more negative view of St. Paul's stand-alone financial strength reflects concerns about the adequacy of loss reserves associated with runoff operations, reserves for business written in the soft market years of 1998-2001, and asbestos exposure," Iten added.

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