AM Best


MAY 23, 2008 12:00 AM (EDT)

A.M. Best Affirms Ratings of The Hartford Financial Services Group, Inc. and Its Property/Casualty Subsidiaries


CONTACTS:
 Analyst(s)
Sharon Pereira
(908) 439-2200, ext. 5520
sharon.pereira@ambest.com

Michael Lagomarsino, CFA
908) 439-2200, ext. 5810
michael.lagomarsino@ambest.com
Public Relations
Jim Peavy
(908) 439-2200, ext. 5644
james.peavy@ambest.com

Rachelle Morrow
(908) 439-2200, ext. 5378
rachelle.morrow@ambest.com

FOR IMMEDIATE RELEASE

OLDWICK, N.J. - MAY 23, 2008 12:00 AM (EDT)
A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of "aa-" of the Hartford Insurance Pool (The Pool) and its property/casualty members. Concurrently, A.M. Best has affirmed the ICR of "a", debt ratings and shelf registration of The Hartford Financial Services Group, Inc. (The Hartford) (Hartford, CT) [NYSE: HIG]. The outlook for all ratings is stable. (See link below for a detailed listing of the companies and ratings.)

The Pool's ratings reflect its superior risk-adjusted capitalization, strong core operating results, disciplined risk management culture and excellent business position in the property/casualty insurance sector. These positive rating factors are derived from The Pool's adherence to conservative operating fundamentals and commitment to diversified underwriting and marketing strategies that provide balanced growth opportunities. A.M. Best believes The Pool is well positioned to manage changing market dynamics such as reduced pricing and increased competition due to its significant depth and breadth of operations, well balanced risk selection, effective utilization of multiple distribution channels and superior capitalization, which is further bolstered by The Hartford's strong financial flexibility and proven access to capital markets.

These favorable considerations are somewhat tempered by expected margin compression driven by softening market conditions throughout the property/casualty industry. Moreover, The Pool maintains exposure, albeit substantially reduced, to emerging asbestos and environmental claims and adverse loss reserve development on older accident years. However, management conducts annual ground-up loss reserve reviews for asbestos (second quarter) and environmental (third quarter) reserves, as well as an annual evaluation of reinsurance recoverables. Additional offsetting attributes are The Pool's exposure to catastrophe events (natural and man-made), although it has a comprehensive reinsurance and catastrophe management program to limit its exposure to a single event.

The ratings for The Hartford represent the use of extraordinary notching as the overall enterprise benefits from the diversification of its equally important and diverse property/casualty and life operations, which provide strong, sustainable earnings and cash flows. This has been evidenced by the even distribution of revenues and contributions to earnings from both operations in recent years, which tend to be largely uncorrelated. Also, the property/casualty and life operations maintain strong, market leading positions in their respective markets.

The ratings also recognize the improvement in The Hartford's financial leverage and coverage measures through 2007, with an adjusted debt-to-total capital measure of 19% (including accumulated other comprehensive income) and interest coverage of approximately 16.2 times. However, leverage and coverage measures did deteriorate in first quarter 2008, primarily due to the negative impact of unrealized capital losses on stockholders' equity and realized capital losses on earnings largely within the life business segments. Unrealized capital losses during first quarter 2008 primarily were due to the negative impact of credit spread widening on fixed income securities. Realized capital losses during the quarter were caused by the transition to a new accounting standard (SFAS 157), impairments and credit derivative losses. Despite this, A.M. Best believes The Hartford's earnings power remains strong, in the absence of unusual items, and should lead to improvement in financial leverage and interest coverage measures through the remainder of 2008.

For a complete list of The Hartford Financial Services Group, Inc.'s FSRs, ICRs and debt ratings, visit Hartford Pool.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.

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