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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MARCH 05, 2004 12:00 AM (EST)
A.M. Best Co. has affirmed the financial strength ratings of A+ (Superior) of The Hartford Insurance Pool (The Pool) and the key life/health insurance subsidiaries of Hartford Life, Inc. (HLI). In addition, the group's financial strength rating of A+ (Superior) has been extended to Hartford Life Group Insurance Company (Chicago, IL), which was recently acquired. Concurrently, A.M. Best has assigned a debt rating of "a-" to the $200 million 4.75% 10-year senior unsecured notes recently issued by Hartford Financial Services Group, Inc. (The Hartford) [NYSE: HIG]. Additionally, A.M. Best has affirmed the debt rating of "a-" on existing senior unsecured debt issued by The Hartford and HLI (all of Hartford, CT, except where noted), as well as the rating of "bbb" on trust preferred securities issued through Hartford Capital III and Hartford Life Capital I and II. The outlook for all ratings is stable.
The ratings recognize The Pool's superior capital position, solid core operating results and significant national market presence. A.M. Best's evaluation of capital incorporates the 2003 asbestos reserve strengthening of $2.6 billion and subsequent recapitalization. Additionally, A.M. Best views the MacArthur asbestos settlement positively as it is The Hartford's largest asbestos claim. The ratings further reflect the various operational initiatives taken by management in 2003 to continue to improve core operating profitability. Recent actions include the effective exit of assumed reinsurance, discontinuation of certain specialty lines within the property/casualty operations, elimination of higher risk investment classes and cost cutting measures. These favorable considerations are tempered by The Hartford's ongoing-albeit substantially reduced-exposure to emerging asbestos and environmental (A&E) claims and loss and loss adjustment expense reserve volatility on older accident years within the group's personal lines and specialty commercial segments.
HLI's ratings reflect its strong market positions in several U.S. life insurance and retirement savings businesses (most notably variable annuities), diversified sources of revenues and earnings, broad multi-channel distribution, excellent operating performance and adequate capitalization. Partly offsetting these positive factors is HLI's challenge of maintaining capital to support substantial sales growth across its various product lines as well as managing risk with respect to secondary guarantees through product pricing and effective hedging. Moreover, HLI's operating results and capitalization are exposed to a potential downturn in the equity markets as almost half of its earnings are derived from individual annuities. Although the combination of sales growth, investment losses and regular shareholder dividends has caused strain on HLI's risk-adjusted capital position, A.M. Best expects the life operations to continue to build and maintain stronger capitalization in the near to medium term primarily from improved statutory results and, if needed, financial support from The Hartford.
The Hartford's financial leverage has historically been at the high end of A.M. Best's tolerance for its debt ratings, and coverage measures have been low-particularly given its low level of holding company liquidity and cash flow versus similarly-rated peers. A.M. Best acknowledges management's commitment to de-leveraging the company and reducing interest expense-the execution of which has already begun with the company's trust preferred redemption through a partial refinancing and principal repayment through dividends from subsidiaries. Additionally, these leverage concerns are offset by The Hartford's capital markets presence, sustainable earnings power and diversified business platform.
For a complete list of Hartford Financial Services Group, Inc.'s financial strength and debt ratings, please visit Hartford.
For a list of A.M. Best's debt ratings, please visit Best's Debt Rating Center.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source