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The Hartford issues statement to calm investors after ratings outlook changes


October 1, 2008   by Canadian Underwriter


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The Hartford has issued a public statement to calm investors after Fitch Ratings revised its outlook on The Harford Financial Services Group’s life insurance and property and casualty operations from ‘stable’ to ‘negative.’
Although Fitch revised its outlook, it maintained its ratings for The Hartford’s companies. Most of the company’s P&C insurance subsidiaries are rated ‘AA.’
Nevertheless, news of the revised outlook based on the troubled markets, the life operation’s shrinking assets and the company’s “above average exposure” to credit default swaps (linked to subprime mortgages) sent Hartford’s stock for a fall.
The Hartford’s stock declined US$9.01 a share, or 18%, to US$40.99 on Sept. 30 on the New York Stock Exchange.
The fall prompted Hartford to issue the following public comment:
“It is not the company’s policy to generally comment on fluctuations in its share price,” the statement reads. “We are disappointed with our recent stock performance but recognize we are living through a period of unprecedented market conditions.
“The Hartford’s core operating businesses are performing well and our liquidity remains strong.”
Fitch said its negative outlook reflected “concerns” it had “related to the company’s financial profile given the extraordinarily challenging credit market environment.”
Specifically, Fitch said “the negative outlook reflects [The Hartford] has disclosed material exposure to troubled credits in its asset portfolio.”
Also, Fitch noted, “[The] Hartford’s life insurance operations have experienced a drop in capital levels cause by a deterioration in asset values and a decline in earnings, both of which are driven by weakened capital market conditions.
“Fitch notes that the company maintains a meaningful exposure to overall unrealized and realized losses as well as specific losses in distressed credits, and above average exposure to sub-prime residential mortgage-backed securities and commercial real estate CDOs.”
Fitch said its negative outlook on Hartford’s P&C operations reflected “the potential for reduced levels of excess capital in the property/casualty subsidiaries in order to fund capital needs in the life operations.”


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