St. Paul Travelers' Divestiture Plan Gets Kudos
NU Online News Service, March 28, 3:14 p.m. EST?The St. Paul Travelers Companies' newly announced plan to divest its entire 79 percent stake in its asset-management unit is getting a favorable review from a major ratings agency.[@@]
The country's second largest commercial insurer disclosed Friday it is implementing a program to sell off its stake in Nuveen Investments Inc. which will be completed in three separate phases. The latest announcement follows the statement from company management in January that it was exploring various strategic alternatives for divesting its Nuveen shares.
The St. Paul, Minn.-headquartered carrier disclosed that it will sell 39.6 million Nuveen shares in a public stock offering, with the share price to be determined in the next few weeks.
Nuveen will also repurchase $600 million of its shares from St. Paul Travelers at the same price as the stock offering. Finally, the carrier will enter into "forward sale" contracts with Merrill Lynch and Morgan Stanley affiliates for its remaining Nuveen stake of about 13.5 million shares.
The announcement was favorably received by A.M. Best, which sees the divestiture as a way for St. Paul Travelers to improve its holding company liquidity.
"We view this divestiture positively as it would likely result in a significant increase in St. Paul Travelers' holding company liquidity, operating company capital and tangible net worth," A.M. Best analyst W. Dolson Smith told National Underwriter. "Ultimately it will depend on terms of the divestiture, the completion of the transaction, and our analysis thereof."
The Oldwick, N.J.-based ratings agency currently has its "A-plus" Travelers Property-Casualty Pool financial strength rating and various St. Paul Travelers debt ratings under review with "Negative" implications, pending the close of this transaction.
The agency first put these ratings under review in January in light of the carrier's addition of prior-year loss reserves totaling $868 million which resulted in weaker-than-expected earnings for 2004, as well as "less-than-anticipated" holding company liquidity.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.