A.M. Best Affirms FSR to the Hartford Financial Services Group

July 15, 2005

A.M. Best Co. has affirmed the financial strength ratings of A+ (Superior) and assigned issuer credit ratings (ICR) of “aa-” to the Hartford Insurance Pool (The Pool) and its members.

Concurrently, A.M. Best has assigned an ICR of “a-” to Hartford Financial Services Group Inc. and has affirmed all its outstanding debt ratings. All ratings have a stable outlook.

The ratings reflect The Pool’s superior capitalization, very strong operating results and excellent business position. The Pool enjoys significant operational breadth and depth in desired markets and utilizes its advantageous scale and scope of product offerings, distribution capabilities, technological expertise and service focus to respond to market trends in core business lines serving commercial and personal lines insurance markets.

Furthermore, due to considerable rate increases from prior pricing periods earning through the income statement, enhanced risk selection and cost cutting initiatives, The Pool has generated solid underwriting results in core business lines, as evidenced by a reported year-end 2004 statutory combined ratio of 99.7 with strong operating momentum continuing through the first quarter 2005.

Somewhat offsetting these strengths are the continued exposure to adverse loss reserve development from prior accident years, softening market conditions with regard to premium pricing and modest concerns pertaining to the various subpoenas that The Hartford has received in relation to various regulatory probes that have occurred throughout the insurance industry.

In 2004, The Hartford reported adverse loss reserve development including a $256 million strengthening related to asbestos and environmental reserves, a significant reduction from the prior year and additional reserve charges related to construction defect claims and assumed reinsurance liabilities that are in runoff. These charges were offset to some degree by favorable development pertaining to a reduction of the initial loss estimates associated with the tragedy of Sept. 11, 2001.

A.M. Best maintains that The Hartford has been among the most proactive U.S. insurers in addressing loss reserve deficiencies. However, A.M. Best believes that there is potential for loss reserve development to impact the prospective earnings of The Pool.

The Hartford’s financial leverage improved as noted by the reduction of its total debt-to-capital declining to 27.8% in 2004 from 35.3% in 2003. In past years, The Hartford’s financial leverage had historically been at the high-end of the acceptable range of A.M. Best’s tolerance for its debt ratings.

Prospectively, A.M. Best believes that The Hartford will continue to reduce holding company leverage while maintaining adequate interest coverage ratios.

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