Rating agency AM Best has upgraded the financial strength rating (FSR) of Travelers from A+ to A++, the highest possible rating.
It also raised Travelers’ issuer credit ratings (ICR) from aa to aa+ and revised the outlook for the ratings from positive to stable.
AM Best said that the rating actions reflect Travelers' solid risk-adjusted capitalisation, trend of favourable operating and underwriting results, excellent market profile in commercial and personal lines (largely distributed through independent agents) and effective management team.
The rating agency acknowledged Travelers’ proactive and comprehensive risk management, underwriting and financial discipline, relatively conservative investment portfolio, geographic and product diversification and enhanced technology and internal information systems, which have improved its underwriting effectiveness and ability to service agents and customers in both commercial and personal lines.
“In addition, Travelers' superior product breadth, industry leading data and analytics and leading position within its distribution network have enabled it to report a trend of strong earnings that have outperformed the majority of its peers over time, despite an increase in weather-related losses and the current low interest rate environment,” said the rating agency.
Offsetting these positive rating factors are the ongoing competitive environment within the property/casualty markets and Travelers' exposure to natural and man-made catastrophes.
“Like other leading carriers within the US property/casualty industry, Travelers remains exposed to the potential development of asbestos and environmental (A&E) liabilities; however, in more recent years, it has seen less adverse A&E reserve development emerge. Over the past several years, the group's overall commercial lines reserves appear to have stabilised, as evidenced by favourable prior year loss reserve development, while redundancies have consistently occurred in personal lines reserves,” said AM Best.
While AM Best believes that Travelers’ is well positioned at its current rating levels given the rating upgrades, positive movement is unlikely in the near term. Factors that could lead to negative rating actions include deterioration in underwriting and operating performance to a level below peers and/or an erosion of surplus that causes a decline in risk-adjusted capital to a level that is no longer supportive of the current ratings.
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AM Best, Travelers, Ratings, North America