OREANDA-NEWS. Fitch Ratings has affirmed its ratings on The Travelers Companies, Inc. (NYSE: TRV), as follows:

--Issuer Default Rating (IDR) at 'A+';
--Senior unsecured notes at 'A';
--Subordinated notes at 'BBB+';
--Insurer Financial Strength (IFS) on insurance company subsidiaries at 'AA'.

See the full list of rating actions below. The Rating Outlook is Stable.

KEY RATING DRIVERS
TRV's ratings are supported by a top-tier competitive position in the U.S. property/casualty insurance market, prudent capital management, a solid reserve position, a history of strong earnings and good financial flexibility.

Fitch views the company's market position and size/scale as 'Large' and notes that companies with this profile are typically rated in the 'AA' category. TRV offers a wide range of insurance products to both the commercial and personal lines markets and frequently occupies a top tier position among independent insurance agencies.

Capitalization at the operating company level scored 'Very Strong' on Fitch's proprietary capital model, Prism, which is considered consistent with TRV's 'AA' IFS rating. Other measures of capital strength such as operating leverage and net leverage ratios were 1.0x and 4.0x, respectively, as of Sept. 30, 2015 and are consistent with median guidelines for the current rating category.

Fitch expects share repurchase activity to reflect underlying profitability and will not reduce capital strength. TRV repurchased 21.5 million common shares at a total cost of $2.2 billion during the first nine months of 2015 with $4.3 billion of capacity remaining under its share repurchase authorization.

TRV's financial leverage ratio was 22.9% at Sept. 30, 2015, remaining within management's stated target range of 15%-25%. Operating EBIT coverage of fixed charges was 13.6x during the first nine months of 2015, which remains at the upper end of Fitch's median guidelines for the current rating category.

All three business segments - Business and International Insurance, Bond & Specialty Insurance, and Personal Insurance - reported material favorable reserve development through the first nine months of 2015. Business and International Insurance reported favorable development of $229 million despite $296 million of adverse development from asbestos and environmental. TRV's period-over-period increase in favorable reserve development was contrary to Fitch's expectation of declining favorable development for the property/casualty industry in general.

The combined ratio was 88.9% during the first nine months of 2015, improving modestly from 90.3% in the comparable period of 2014. All three business segments reported underwriting profits and favorable prior-period reserve development.

Annualized return on stockholders' equity (ROE) was 14.8% for the first nine months of 2015, down from 15.7% for the full year 2014. Profitability is expected to be pressured in the near term as the low interest rate environment continues to challenge net investment income.

The company has maintained strong financial flexibility with $2 billion in cash, short-term invested assets and other marketable securities at Sept. 30, 2015. The annual estimate of holding company interest expense and common dividends was $1.1 billion. Proceeds from August's senior debt issuance will be used to repay $400 million in senior notes maturing in December 2015.
Fitch believes that TRV has successfully transitioned between CEOs. On Aug. 4, 2015, the company announced its chairman and CEO, Jay Fishman, would step down on Dec. 1, 2015 and move into the role of executive chairman. The new CEO is Alan Schnitzer, who has worked for TRV since 2007, and previously was the chief executive officer of Travelers' Business and International Insurance.
RATING SENSITIVITIES
Key rating triggers that could lead to a downgrade include:

- Capitalization at the underwriting subsidiaries that is inconsistent with standards for the current rating category such as consolidated statutory net leverage greater than 4.5x, a long-term increase in the financial leverage ratio to greater than 25% or a deterioration in the Prism score to below the 'Very Strong' category;
- A GAAP fixed-charge coverage ratio less than 8x on a run-rate basis;
- A sustained period of net losses or catastrophe losses out of proportion with the company's market share.

Key rating triggers that could lead to an upgrade include:

- Improvement in TRV's capitalization measured by a Prism score of 'Extremely Strong'. However, given publicly traded companies' sensitivity around managing capital, this level of overcapitalization is unlikely;
- Sustained underwriting performance across business lines that is clearly better than the industry and similarly-rated peers.

FULL LIST OF RATING ACTIONS

The following ratings have been affirmed by Fitch:

The Travelers Companies, Inc.
--Long-term IDR at 'A+';
--Short-term IDR at 'F1';
--5.50% senior notes due Dec. 1, 2015 at 'A';
--6.25% senior notes due June 20, 2016 at 'A';
--5.75% senior notes due Dec. 15, 2017 at 'A';
--5.80% senior notes due May 15, 2018 at 'A';
--5.90% senior notes due June 2, 2019 at 'A';
--3.90% senior notes due Nov. 1, 2020 at 'A';
--6.75% senior notes due June 20, 2036 at 'A';
--6.25% senior notes due June 15, 2037 at 'A';
--5.35% senior notes due Nov. 1, 2040 at 'A';
--4.60% senior notes due Aug. 1, 2043 at 'A';
--4.30% senior notes due Aug. 25, 2045 at 'A';
--6.25% junior subordinated debentures due March 15, 2067 at 'BBB+';
--$800 million commercial paper program at 'F1'.

MMI Capital Trust I
--7.625% Trust preferred due Dec. 15, 2027 at 'BBB+'.

USF&G Capital Trust I
--8.500% Trust preferred due Dec. 15, 2045 at 'BBB+'.

USF&G Capital Trust III
--8.312% Trust preferred due July 1, 2046 at 'BBB+'.

Travelers Insurance Group Holdings Inc.
--Long-term IDR 'A+';
--7.75% senior notes due April 15, 2026 at 'A'.

Travelers Property Casualty Corp.
--Long-term IDR 'A+';
--6.375% senior notes due March 15, 2033 at 'A'.

The IFS ratings of the following members of the Travelers Inter-company Pool have been affirmed at 'AA', with a Stable Outlook:

--St. Paul Fire and Marine Insurance Company
--The Travelers Indemnity Company
--Travelers Casualty and Surety Company
--The Phoenix Insurance Company
--The Standard Fire Insurance Company
--United States Fidelity and Guaranty Company
--Travelers Casualty Insurance Company of America
--Farmington Casualty Company
--The Automobile Insurance Company of Hartford, Connecticut
--The Travelers Indemnity Company of Connecticut
--The Charter Oak Fire Insurance Company
--St. Paul Surplus Lines Insurance Company
--The Travelers Indemnity Company of America
--St. Paul Protective Insurance Company
--Travelers Casualty Company of Connecticut
--Travelers Commercial Casualty Company
--Travelers Commercial Insurance Company
--St. Paul Mercury Insurance Company
--Travelers Property Casualty Company of America
--Travelers Property Casualty Insurance Company
--The Travelers Casualty Company
--Travelers Constitution State Insurance Company
--TravCo Insurance Company
--Travelers Excess and Surplus Lines Company
--The Travelers Home and Marine Insurance Company
--Travelers Personal Security Insurance Company
--Travelers Personal Insurance Company
--Discover Property & Casualty Insurance Company
--Discover Specialty Insurance Company
--Fidelity and Guaranty Insurance Underwriters, Inc.
--St. Paul Guardian Insurance Company
--American Equity Specialty Insurance Company
--Northfield Insurance Company
--Northland Insurance Company
--Northland Casualty Company

In addition, the IFS ratings of the following members of the Travelers Group have been affirmed at 'AA', with a Stable Outlook:

--Fidelity and Guaranty Insurance Company
--Select Insurance Company
--St. Paul Fire and Casualty Insurance Company
--The Travelers Lloyds Insurance Company
--Travelers Lloyds of Texas Insurance Company
--First Floridian Auto and Home Insurance Company
--Travelers Casualty and Surety Company of America
--Gulf Underwriters Insurance Company
--American Equity Insurance Company