OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” and the Long- and Short-Term Issue Credit Ratings (Long-Term IR; Short-Term IR) of The Hartford Financial Services Group, Inc. (The Hartford) (NYSE:HIG), which is the ultimate parent of the companies hereinafter mentioned. A.M. Best also has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and Long-Term ICR of “aa-” of Hartford Fire Insurance Company and its pooling subsidiaries and affiliates, collectively known as the Hartford Insurance Pool. The outlook for these Credit Ratings (ratings) is stable.
Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” of Hartford Life and Accident Insurance Company (HLA), as well as the FSR of A- (Excellent) and the Long-Term ICR of “a-” of Hartford Life Insurance Company (HLIC) and Hartford Life and Annuity Insurance Company (collectively referred to as Hartford Life). Additionally, A.M. Best has affirmed all Long-Term IRs for HLIC. The outlook for these ratings is stable.
A.M. Best has also affirmed the Long-Term ICR of “bbb” and the Long-Term IRs of Hartford Life, Inc. (HLI), the intermediate parent of HLA and Hartford Life. The outlook for these ratings is stable.
All of the above companies are headquartered in Hartford, CT.
The ratings of the Hartford Insurance Pool reflect its solid risk-adjusted capitalization, generally favorable underwriting results and consistently strong operating profitability (reflected in its combined ratio and pre-tax return on revenue measures) and excellent market position within the property/casualty industry. The positive rating factors are derived from the pool’s geographic and product line diversity, experienced management team, generally conservative operating fundamentals and diversified underwriting initiatives, which provide balanced growth opportunities. Management has executed various operating initiatives to focus operations on small to middle commercial markets and personal lines business that are viewed as less volatile and provide opportunities for profitable growth. The group also targets larger insureds in specialty casualty markets, which complements the complete book of business. The personal lines segment benefits from the pool’s affinity relationship through a long-term endorsement from the American Association of Retired Persons (AARP), although this business does present some concentration risks. The pool’s use of technology platforms throughout the organization, localized support and excellent service further strengthen its business position.
These positive rating factors are somewhat offset by the significant stockholder dividends paid during the most recent five-year period that have constrained organic surplus growth, and variability in operating performance due to the impact of weather-related losses early in the most-recent five-year period, and more recently, less favorable performance in the private passenger auto line of business, driven by increases in frequency and severity of bodily injury claims. The group’s results also have been impacted by adverse loss reserve development in recent calendar years related to its asbestos and environmental (A&E) liabilities. However, the group entered into a reinsurance agreement with National Indemnity Company at the end of 2016 to cover up to $1.5 billion in future adverse loss reserve development of those A&E liabilities to mitigate further uncertainty regarding these reserves. The pool also maintains above-average exposure to affiliated investments and commercial real estate assets relative to the overall property/casualty peer group, but its demonstrated ability to manage those investments tempers concern with respect to those assets.
The affirmation of HLA’s ratings reflects its recognized market position as a provider of group employee benefit products, its favorable earnings performance over the past few years and continued solid level of risk-adjusted capital. HLA’s core earnings have been driven by relatively modest top line growth, a stable loss ratio and a controlled level of insurance operating expenses. A.M. Best notes that the group benefit market remains highly competitive and HLA’s contribution to The Hartford’s overall earnings remains relatively modest at approximately 10% through the first quarter of 2017.
The affirmation of Hartford Life’s ratings reflects the financial strength of The Hartford, as well as its favorable operating earnings, strong level of risk-adjusted capital and its continued reduction in balance sheet risk from its variable annuity business, which is currently in runoff. In addition, the group’s discontinued business also includes its fixed and institutional annuities product lines. Hartford Life’s contribution to the overall organization remains favorable, but is expected to decline over time as its levels of business and assets decrease. Hartford Life’s risk-adjusted capital remains sufficient to support the obligations of its discontinued annuity business.
The affirmation of HLI’s ratings reflects the continued decline in balance sheet risk of its subsidiary’s annuity business, the favorable operating earnings and dividend capacity of its subsidiaries and the implicit support that is afforded by The Hartford.
The Hartford’s debt-to-total capital ratio (excluding accumulated other comprehensive income) and interest coverage ratios are within A.M. Best’s guidelines for its current ratings. A.M. Best anticipates The Hartford will maintain solid liquidity at the holding company to support any potential capital needs of its operating subsidiaries.
For a complete listing of The Hartford’s FSRs, Long-Term ICRs and Long-Term IRs, please visit The Hartford Financial Services Group, Inc.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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