On Monday A.M. Best Co. in Oldwick, N.J. said it was downgrading the St. Paul strength rating to "A" (excellent) from "A-plus" (superior). Best mentioned the asbestos case, but also said it was concerned about possible impact on company reserves from Enron claims and various runoff obligations.

Standard & Poor's and Moody's have also put the company on a ratings watch.

St. Paul has said it has plenty of reserves, is in a solid financial position and does not believe the nearly $1 billion settlement will have any effect on its ability to do business.

Fitch noted The St. Paul Companies is currently evaluating raising equity capital and said it anticipates resolving its Rating Watch when The St. Paul completes its evaluation.

Fitch said St. Paul's current consolidated financial leverage is at the high end of Fitch's tolerance for the current rating levels.

The rating firm said it believes that St. Paul's operating companies' capitalization will suffer as a result of the asbestos settlement litigation.

Additionally, Fitch said it believes that St. Paul's operating companies will likely resume paying dividends to St. Paul in 2003, which will further constrain the operating companies' capital formation. As a result, Fitch considers The St. Paul Companies' ability to raise equity capital a key factor in the company's ability to maintain its current ratings.

Other key factors that Fitch said it will consider when reviewing The St. Paul ratings include its view of the company's run-rate earnings profile and ability to manage the execution risks associated with restructuring efforts that were implemented in 2001.