Hartford Stocks Soar on Capital Holdings News

Nov. 3, 2008 – A lethargic stock market sprung to life today, almost doubling the price of Hartford Services Group stocks since its low of $8.40 on Oct. 30 to a closing price of $16.28 on Nov. 3 thanks partly to company officials announcing they have more than sufficient capital reserves to maintain credit and insurer ratings.

Officials at the Hartford Services Group in a filing with the U.S. Securities and Exchange Commission today indicated the company has $2 billion more than needed to maintain A2 ratings. Mostly due to a sudden decline in the S&P 500 Index, the $2 billion figure is down 43 percent from the $3.5 billion surplus company officials reported on Oct. 6.

“The Hartford is financially strong and well capitalized,” Hartford Chairman and Chief Executive Officer Ramani Ayer said in a statement. “The company’s risk-based capital ratio, including a number of provisions, is estimated to be above 400 percent at year-end S&P 500 levels of 900. Our capital position is more than sufficient for current market conditions and in the event markets deteriorate further.”

Because the Hartford remains fiscally sound, company officials say it has sufficient capital to weather volatile market conditions in the short term. If market conditions “become more severe,” Ayer said the company has access to other sources of capital, including the parent company and the property and casualty subsidiaries, a $500 million contingent capital facility and a $1.9 billion bank credit facility. The Hartford also received a $2.5 billion capital injection from Allianz in mid-October.

News of the surplus was received well at Moody’s Investor Service, which today affirmed the A3 insurer financial strength rating for the Hartford’s property and casualty and life insurance companies.

But the announcement didn’t fully spare the company. Moody’s officials also downgraded Hartford Financial Services Group’s senior unsecured debt rating to A3 from A2 and its short-term debt rating to Prime-2 from Prime-1. Citing market conditions and a decline in the Hartford’s variable annuity business, Fitch Ratings on Oct. 31 had cut the issuer default rating of the Hartford to A from A+ and its senior debt rating to A- from A.

Although Moody’s says the ratings outlook is stable for the Hartford’s property and casualty companies, the ratings outlook for the Hartford’s life insurance subsidiaries remains negative. “The Hartford’s recently released final third quarter results and continuing weakness in both credit and equity markets have confirmed our concerns,” said Jeffrey Berg, Moody’s senior vice president.