Best also affirmed the "A" (Excellent) financial strength rating of the St. Paul Companies in the newly merged firm and removed those units from under review and assigned them "Positive" outlooks. Some ratings of St. Paul units were even upgraded, with senior debt ratings moving to "a" from "triple-b-plus" and subordinated debts going to "a-minus" from "triple-b." These ratings have also been removed from under review and assigned "Stable" outlooks.

Best said its ratings adjustment for units of the St. Paul, Minn.-based St. Paul Travelers Companies reflect Traveler's consolidation with "a lower-rated and more financially leveraged" St. Paul.

The ratings agency commented that despite strengths Travelers brings to this merger, this transaction creates a company with an "increased risk profile, with greater uncertainty" as compared with Travelers alone, especially in areas of reserve adequacy and earnings stability.

A.M. Best said it expects St. Paul Travelers to benefit from cross-selling opportunities by offering complementary products?with Travelers being strong in general commercial lines and St. Paul in specialty commercial lines.

The merger also results in greater geographic spread and diversification of businesses, with Travelers' presence being strong in the Northeast and East Coast, and St. Paul in the Midwest and South. Furthermore, the consolidation could create significant expense savings through integration, Best forecast.

Best said that even though Travelers units' ratings have been downgraded, their disciplined underwriting and risk management and conservative investment management should result in "continued superior operating performance and capitalization." On St. Paul units, Best said its ratings action on those businesses reflects its merging with a higher-rated and less financially leveraged organization.

Going forward, A.M. Best said it expects financial strength ratings of St. Paul and Travelers pools will converge over time as their operations are integrated.