Additionally, Fitch Ratings in New York has placed the "double-A" insurer financial strength ratings of members of the Travelers and the "A" senior debt and long-term issuer ratings of Travelers Insurance Group Holdings on Rating Watch "negative" status. It also placed its "triple-B-plus" long-term senior debt rating of The St. Paul Companies on the Rating Watch "positive" status.

Moody's Investors Service, also in New York, has confirmed the long-term and short-term ratings of The St. Paul Companies and subsidiaries. It has also confirmed insurance financial strength ratings of Travelers rated subsidiaries, but placed long-term debt ratings of Travelers and Travelers Insurance Group Holdings Inc. on review for possible downgrade.

While the companies called the transaction "a merger of equals", The St. Paul will be, in effect, the buyer in this tax-free, stock-swap deal, worth some $16.01 billion. Under the agreement, each holder of Travelers' common stock will get 0.4334 of a St. Paul share for each Travelers share they hold.

The newly merged company will have some $107 billion worth of assets, along with total capital of $26 billion and net written premiums of $20 billion.

The two companies also said the St. Paul group will remain as a Minnesota corporation and will have its corporate headquarters in St. Paul.

Looking at various business units, the company's specialty insurance lines--to be called St. Paul Specialty--will also be based in St. Paul, while St. Paul's current international business will continue to be headquartered in London. Meanwhile, commercial and personal lines of the new company will be based out of Hartford, Conn., and will be combined under the Travelers brand.

The transaction, the two insurers noted, has been approved by the companies' boards, but is still subject to approval by shareholders and regulators. The companies said they expect to complete the transaction by the second quarter of 2004.

"What this represents is potentially the largest property-casualty insurance deal in years. Major mergers-and-acquisitions activities in this industry went into hibernation about four year ago," said Robert Hartwig, chief economist and vice president of the Insurance Information Institute in New York.

He observed that there have been very few mergers of any substantial size in the p-c business for years now, although there has been some increase on the life side recently.

"That's because there continue to be fears over what sort of liabilities an insurer that's been around a long time might have that could emerge after an acquisition," he said. "Many insurers had unpleasant experiences with acquisitions in 1990s for this reason."

The announcement itself was a bit surprising because the merger discussion was kept under wraps, Mr. Hartwig also said. But he added it wasn't that unexpected that those two companies would be involved in a deal, noting that Jay Fishman, chief executive at The St. Paul, has a long history with Travelers.

"He's transformed The St. Paul Companies into something that is reminiscent of the way Travelers operates," he said. "He had years of management experience at Travelers?so it's not surprising that you see, of all the deals that could be done, that this is the one out of the gate."