A.M. Best Co. placed the excess & surplus lines business that St. Paul Travelers plans to sell under review, adding it expects to downgrade the financial strength of the businesses after the sale.

The Oldwick, N.J.-based rating firm said that it has placed the financial strength ratings of "A-plus" (Superior) and issuer credit ratings of "double-a-minus" of GeoVera Insurance Company, USF&G Specialty Insurance Company--both based in Hunt Valley, Md.--and Pacific Select Property Insurance Company in Fairfield, Calif., under review with negative implications.

The three form St. Paul Travelers CATRisk operation, the St. Paul, Minn.-based monoline earthquake and excess and surplus and personal lines property unit.

Yesterday, St. Paul Travelers said it plans to sell the units to the private equity investment firms Friedman Feischer & Lowe, LLC, and Hellman & Friedman, LLC.

Terms were not released. The deal is expected to be completed in the fourth quarter of this year.

Best said the current ratings of the three businesses are the result of their affiliation with St. Paul Travelers.

After completing the deal Best said it plans to issue a new rating on the three companies, which will likely be downgraded by two notches.

Best said the newly formed group would focus on underwriting catastrophe-exposed residential property risks, primarily in California, Florida and Texas.

The group would consist of a Bermuda-domiciled holding company and reinsurance operating company, which will assume 50 percent of the business produced from the three.

A spokesman for St. Paul Travelers said the company would not comment on the ratings action. He said it would not affect the sale.

Special Reports /

Best Puts St. Paul Travelers Units Under Review

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