Standard & Poor’s said it would not take any immediate rating actions on Hartford Financial Services Group Inc. or its double-‘A’ rated property/casualty companies following the announcement that the company is reclassifying from IBNR to case $120 million-$150 million of its asbestos reserves. Total asbestos reserves will remain unchanged, and there will be no impact on earnings.
The reclassification reflects the settlement of an asbestos claim involving PPG Industries Inc.’s joint venture with Pittsburgh Corning Corp.However, the outlook on Hartford’s property/casualty operations remains negative to reflect Standard & Poor’s concerns about Hartford’s capital adequacy, which is currently below expectations. Furthermore, Standard & Poor’s expects that the issue of reserve adequacyas it relates to asbestos claimswill continue to challenge the company’s resources.
Those concerns are partially offset by the company’s strong market position as the ninth largest property/casualty group in the U.S., with about $7.0 billion of net premiums written. The rating also benefits from the property/casualty companies’ association with Hartford Life Insurance Co., which Standard & Poor’s believes provides a valuable source of diversification and financial strength. Profitability is expected to benefit and eventually improve from the favorable pricing trends in commercial insurance.
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