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Rating Action:

MOODY'S DOWNGRADES DEBT RATINGS OF THE HARTFORD (TO A3 FROM A2); OUTLOOK IS NEGATIVE

14 May 2003
MOODY'S DOWNGRADES DEBT RATINGS OF THE HARTFORD (TO A3 FROM A2); OUTLOOK IS NEGATIVE

Approximately $4.4 Billion of Debt Securities Affected.

New York, May 14, 2003 -- Moody's Investors Service has downgraded the debt ratings of both The Hartford Financial Services Group, Inc. and Hartford Life, Inc. to A3 from A2 and their short-term commercial paper ratings to P-2 from P-1. These rating actions conclude a review that was initiated on May 14, 2003 following the company's announcement of a $1.7 billion net after-tax asbestos charge. Further, today, the company announced its capital plans to raise approximately $1.85 billion in capital, consisting of $1 billion of common stock, $600 million of equity units comprised of common stock purchase contracts and debt securities and $250 million of debt securities. These offerings are expected to be drawn down from an existing shelf registration. Our rating downgrade today incorporates the expectation that The Hartford will successfully complete its capital raising plans. However, if the capital raise initiative does not proceed as planned, the ratings would be subject to further downgrade.

Moody's has assigned an A3 rating to the proposed $250 million senior notes and an A3 rating to the proposed $600 million of equity units expected to be issued by The Hartford Financial Services Group Inc. as part of its capital plan. In conjunction with an equity offering of approximately 21.8 million shares, The Hartford is also expected to offer 12 million equity units with a stated amount of $50 per unit. Each unit will consist of debt securities and a purchase contract under which investors will agree to purchase shares of The Hartford's common stock. Since the equity units are expected to rank pari passu with The Hartford's other senior unsecured obligations, Moody's rates the proposed instrument A3. The proceeds from the offerings are expected to be used to recapitalize the property and casualty insurance companies following the group's $1.7 billion net after-tax charge. The outlook on all of the ratings, except for the Prime-2 rating on commercial paper, is negative.

Expanding on its rationale for downgrade of the debt ratings, Moody's noted that The Hartford's existing financial leverage is high for its rating category. Further, while Moody's views the proposed $1.85 billion capital raise favorably given the substantial equity content, the capital raise will also increase the amount of on-going funding needed by the ultimate parent company, to meet increased fixed charges and common stock dividends over time, which will add incremental pressure to coverage ratios. Moody's believes that more conventional notching (i.e., three notches) between the insurance financial strength ratings and the debt ratings is warranted, in view of a) the group's structure with debt at both the ultimate and life holding companies, and b) the life group's lower statutory profitability.

The outlook for all of the ratings remains negative. The negative outlook for the property and casualty intercompany pool insurance financial strength ratings (Aa3) remains negative which reflects the increased burden on it to fund fixed charges and common stock dividends following the charge and the proposed $1.85 billion recapitalization. The negative outlook for the insurance financial strength ratings (Aa3) of the life insurance companies reflects the group's lower statutory profitability as a result of the down equity markets and credit losses on its investment portfolio.

The following ratings were downgraded and have a negative outlook:

Hartford Financial Services Group, Inc.-- senior long-term debt to A3 from A2; commercial paper to Prime-2 from Prime-1; prospective senior unsecured debt shelf to (P)A3 from (P)A2; prospective senior subordinated debt shelf to (P)Baa1 from (P) A3; prospective preferred shelf to (P) Baa2 from (P)Baa1;

Hartford Capital I - preferred stock to Baa1 from A3;

Hartford Capital II - preferred stock to Baa1 from A3;

Hartford Capital III - preferred shelf to Baa1 from A3;

Hartford Capital IV - preferred shelf to (P)Baa1 from (P)A3;

Hartford Capital V - preferred shelf to (P)Baa1 from (P)A3;

Hartford Capital VI - preferred shelf to (P)Baa1 from (P)A3.

Hartford Life, Inc. -- senior long-term unsecured debt to A3 from A2; prospective junior subordinated debt to (P)Baa1 from (P)A3; commercial paper to Prime-2 from Prime-1;

Hartford Life Capital I -- preferred stock to Baa1 from A3;

Hartford Life Capital II -- preferred stock to Baa1 from A3;

Hartford Life Capital III -- preferred shelf to (P)Baa1 from (P)A3;

Hartford Life Capital IV - preferred shelf to (P)Baa1 from (P)A3;

Hartford Life Capital V - preferred shelf to (P)Baa1 from (P)A3.

The Hartford (NYSE: HIG) is an insurance and financial services organization that offers a wide variety of property and casualty as well as life and annuity insurance products through its insurance operating subsidiaries. As of March 31, 2003, The Hartford reported revenues for the first three months of $4.3 billion and a net loss of $1.4 billion with total assets of nearly $189 billion and shareholders' equity of $9.4 billion.

Visit our website at www.moodys.com/insurance.

New York
Sarah Hibler
VP - Senior Credit Officer
Property & Casualty Insurance
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Ted Collins
Managing Director
Property & Casualty Insurance
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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