Moody's Lowers Credit and Insurance Financial Strength Ratings On Hartford Financial (HIG)
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Moody's lowered the credit ratings of The Hartford Financial Services Group, Inc. (NYSE: HIG) and its key operating subsidiaries and continued the negative outlook on the ratings because of expected continued weakness in earnings and reduced capitalization resulting from investment losses and substantial business exposure to variable annuities. Moreover, the risk of further investment losses and diminished earnings beyond our base case expectations is meaningful in view of unsettled markets and deteriorating economic conditions.
The Hartford's long-term senior debt rating was downgraded to Baa3 from Baa1 and the short-term debt rating to P-3 from P-2. In the same action, Moody's downgraded the insurance financial strength (IFS) ratings for the company's lead property and casualty (P&C) to A2 from A1 and life insurance operating subsidiaries to A3 from A1.
According to Moody's, the downgrade of the life insurance subsidiaries and the continued negative outlook reflect the entities' diminished stand-alone credit profile due to the potential for further losses from the investment portfolio and the variable annuity business in both the U.S. and Japan, as well as the risk of a deterioration in the company's market position in terms of new business and retention.
The IFS rating reflects the benefit of the capital raise from last October currently retained at the parent level, which is available to support NAIC Risk-Based Capital (RBC) levels at the life companies. The rating agency also noted that the companies' A3 IFS ratings benefit from implicit support of the property & casualty companies. However, the company has noted its intent to not materially decapitalize the property & casualty companies in support of the life operations.
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