Standard & Poor’s commented recently on its CreditWatch placement of ratings on Hartford Financial Services Group Inc. (HFSG), Hartford Accident & Indemnity Co., and related entities following the company’s announcement of expected losses related to the World Trade Center (WTC) disaster Sept. 11.
The placement of these ratings on CreditWatch with negative implications reflects Standard & Poor’s concern that the loss arising from this disaster could reduce the capitalization of the property/casualty organization to a level not supportive of its current rating.
Prior to its announcement, HFSG’s capitalization, as measured by Standard & Poor’s capital adequacy model, was slightly below 150 percent. Implicit in Standard & Poor’s rating assumptions was the expectation that management would take steps to improve the level of capital adequacy above 160 percent, but the potential loss from the WTC charge affects management’s ability to do so.
Partially offsetting this concern is the company’s solid and diversified market position in the personal and commercial property/casualty insurance sectors, its strong earnings capability, and its ownership of the life company, which provides another valuable and diversified source of earnings.
Meanwhile, the ratings on the following companies are unaffected by this action: Hartford Life Inc., Hartford Life Insurance Co., Hartford Life & Accident Insurance Co., Hartford Life and Annuity Insurance Co., Hartford International Life Reassurance Corp., American Maturity Life Insurance Co., Hartford Life Capital I, and Hartford Life Capital II.
Standard & Poor’s will be meeting with the management of the Hartford group in the immediate future to review potential exposure to the WTC disaster and its impact on the company’s capital planning process.
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