OLDWICK, N.J. -- (Business Wire)
A.M. Best Co. has removed from under review with negative
implications and downgraded the financial strength ratings (FSR) to A-
(Excellent) from A (Excellent) and the issuer credit ratings (ICR) to
“a-“ from “a+” of Hartford Life and Accident Insurance Company
(HLA), Hartford Life Insurance Company (HLIC), Hartford Life
and Annuity Insurance Company (ILA) and Hartford International
Life Reassurance Corporation (HILRE) (collectively referred to as
Hartford Life). In addition, A.M. Best has removed from under review
with developing implications and downgraded the ICR to “bbb-” from
“bbb+” and the debt ratings of Hartford Life, Inc. At the same
time, A.M. Best has removed from under review with negative implications
and downgraded all debt ratings of Hartford Life Global Funding Trusts,
Hartford Life Institutional Funding and HLIC.
Concurrently, A.M. Best has removed from under review with developing
implications and affirmed the FSR of A (Excellent) and ICRs of “a+” of Hartford
Fire Insurance Company and its pooling subsidiaries and affiliates,
collectively referred to as the Hartford Insurance Pool. At the
same time, A.M. Best has removed from under review with developing
implications and affirmed the ICR of “bbb+” and all debt ratings of The
Hartford Financial Services Group, Inc. (The Hartford) [NYSE: HIG],
which is the ultimate parent of the aforementioned operating insurance
companies. The outlook assigned to all ratings is stable. All companies
are headquartered in Hartford, CT. (Please see link below for a detailed
listing of the companies and ratings.)
The ratings of the Hartford Insurance Pool reflect its solid
risk-adjusted capitalization, strong underwriting fundamentals and
operating profitability and excellent market position within the
These strengths are somewhat offset by the Hartford Insurance Pool’s
recent underwriting losses and decline in operating results relative to
its historical levels, above-average exposure to affiliated investments
and commercial real estate assets compared to the overall
property/casualty peer group and by variability of earnings and return
measures, which were driven by realized and unrealized investment losses
during the most recent five years.
Nevertheless, the outlook reflects A.M. Best’s expectation that the
depth and breadth of operations, generally conservative underwriting
practices and effective utilization of multiple distribution channels
will generate sufficient income to maintain the group’s strong
risk-adjusted capital position while continuing to pay dividends to fund
The Hartford’s obligations.
Positive actions could be taken on the pool's ratings if its
underwriting and operating results improve to levels that outperform its
similarly-rated peers, while maintaining strong risk-adjusted
capitalization. Positive actions also could result from a reduction in
A.M. Best's concerns regarding The Hartford's variable annuity business.
Key factors that could trigger negative rating actions on the pool’s
ratings include a weakening in operating performance, particularly if
the resulting performance is below A.M. Best’s expectations, which
results in a deterioration of risk-adjusted capitalization.
The rating downgrades for Hartford Life recognize its narrower business
profile as a result of the closing of The Hartford’s previously
announced strategic divestitures. On a forward basis, the life
operations will reflect The Hartford’s strong market position in group
benefits business and its discontinued annuity business lines (fixed,
variable and institutional). While the group benefits business is of
value to The Hartford’s overall commercial market strategy as it
re-positions itself to primarily be a property/casualty company, A.M.
Best believes its earnings contribution to the consolidated group will
be modest, based on recent performance. However, A.M. Best notes that
operating margins in group benefits have recently improved. Although
capitalization levels at Hartford Life are viewed as adequate (with some
improvement post divestiture), A.M. Best continues to have concerns
about the potential strain from The Hartford’s run-off variable annuity
business. A.M. Best will continue to monitor The Hartford’s ongoing
initiatives to further de-risk its variable annuity exposure through a
combination of policyholder initiatives, expansion of hedging as well as
continued de-risking of its investment portfolio.
Hartford Life is well positioned at its current rating level. Negative
rating actions could occur if the group were to experience a material
decline in capital and/or operating earnings. Additionally, the ratings
could come under pressure if the group's business profile, which is now
limited, is further reduced by the realigning of The Hartford's group
benefits business outside of the life group's structure.
The Hartford’s debt-to-total capital ratio (excluding accumulated other
comprehensive income) and interest coverage ratios remain within A.M.
Best’s guidelines for its current ratings. In addition to cash and
invested assets at the holding company, The Hartford maintains access to
a $500 million contingent capital facility and has $1.75 billion
available in a syndicated bank facility. A portion of the proceeds from
the sale of the life and retirement services business will be used to
reduce outstanding debt, improving the company’s financial leverage
ratios and reducing future debt service obligations. A.M. Best expects
that The Hartford will continue to maintain strong liquidity at the
holding company to support potential capital needs of Hartford Life
under extreme stress scenarios.
For a complete listing of Hartford Financial Services Group, Inc. and
its subsidiaries’ FSRs, ICRs and debt ratings, please visit www.ambest.com/press/030103hartford.pdf.
The methodology used in determining these ratings is Best’s Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best’s rating process and contains the different rating criteria
employed in the rating process. Key criteria utilized include:
“Understanding BCAR for Property/Casualty Insurers”; “Understanding BCAR
for Life/Health Insurers”; “Understanding Universal BCAR”; “Catastrophe
Analysis in A.M. Best Ratings”; “Insurance Holding Company and Debt
Ratings”; “Rating Members of Insurance Groups”; “Rating Natural
Catastrophe Bonds”; “Risk Management and the Rating Process for
Insurance Companies”; “Analyzing Commercial Paper Programs”; and “The
Treatment of Terrorism Risk in the Rating Evaluation.” Best’s Credit
Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc.ALL RIGHTS
A.M. Best Co.
Gordon McLean, 908-439-2200, ext. 5304
Parodi, 908-439-2200, ext. 5095
Senior Financial Analyst—L/H
Morrow, 908-439-2200, ext. 5378
Senior Manager, Public
Peavy, 908-439-2200, ext. 5644
Assistant Vice President,
Source: A.M. Best Co.
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