Rating agency A.M. Best has downgraded the St Paul Companies' financial strength rating to A (excellent) from A+ (superior).
The senior debt rating has been changed to a- from a, subordinated debt to bbb+ from a- and preferred securities to bbb+ from a-.
The company's commercial paper rating of AMB-1 has been affirmed. The rating outlook is stable.
The agency said this action follows St Paul's announcement that it has entered into a $1bn (£0.7bn) settlement agreement with its largest asbestos claimant, Western MacArthur.
The agency said it also took into consideration the group's earnings, cash flow and balance sheet strength in the wake of the announcement.
However, A.M. Best said it "regards St. Paul's continuing core operating segments as stable, well managed businesses that maintain a well-respected franchise. This is evidenced by St. Paul's favourable operating profit and combined ratio produced in the first quarter of 2002."
