MOODY'S DOWNGRADES VARIOUS RATINGS OF ITT HARTFORD GROUP, INC. AND SUBSIDIARIES (INSURANCE FINANCIAL STRENGTH TO Aa3, FROM Aa2); CONFIRMS SHORT-TERM DEBT AT P-1
New York, 01-23-97 -- Moody's Investors Service downgraded various ratings of ITT Hartford Insurance Group, Inc. (ITT Hartford) and its subsidiaries, including ITT Hartford Group, Inc.'s senior debt to A2, from A1; Hartford Capital I & II's preferred stock ratings to "a2", from "a1"; the insurance financial strength ratings of the Hartford Insurance Group property & casualty intercompany pool members -- led by Hartford Fire Insurance Company -- to Aa3, from Aa2; the insurance financial strength rating of Hartford Life Insurance Company to Aa3, from Aa2; and the insurance financial strength ratings of members of the First State Group -- ITT Hartford's Cameron and Colby run-off P&C business segment -- to Baa2, from A3. Moody's also confirmed its Prime-1 short-term rating on ITT Hartford for its commercial paper. In addition, Moody's announced that its ratings outlook for the group are stable, except for a negative rating outlook for the First State Group. These rating actions conclude a review for possible downgrade initiated on October 18, 1996.
According to Moody's, these rating actions reflect ITT Hartford's increased and significant consolidated financial leverage, the remaining -- albeit significantly mitigated -- risks as to adequacy of loss reserves related to the firm's significant environmental and asbestos exposures, and the continuing intense competition in the group's core business segments -- North American P&C insurance (commercial lines, personal lines, and brokered reinsurance), life insurance (including individual annuities), and international property & casualty insurance. However, Moody's noted that ITT Hartford has significant market positions in its chosen businesses, a focused return-oriented strategy, a disciplined management team with the ability to execute in highly competitive businesses, a high-quality investment portfolio, as well as strong cash flow and liquidity.
Expanding on its rating rationale, Moody's noted that the increased holding company financial leverage -- including debt and preferred securities -- puts additional strain on the regulated insurance operating subsidiaries to provide sufficient dividends to service these obligations. Hartford Life's downgrade reflects the downgrade of its parent, as well as the risks and increased competition in the individual annuity marketplace, the company's modest capitalization, and some remaining interest rate risk in its mortgage-backed securities portfolio. Moody's noted that Hartford Life has diversified earnings from its individual annuity, employee benefit, individual life and specialty insurance lines, and that it is a low cost producer of annuities, with a leading market position in the variable annuity sector. Moody's also added that Hartford Life's rating benefits from the ownership and support of its parent, Hartford Fire.
Moody's also noted that the First State Group's rating downgrade, and negative rating outlook, reflect the group's minimal capitalization given the uncertainties inherent in the group's significant loss reserves -- which includes material environmental and asbestos exposures. Moody's noted, however, that these risks are mitigated by stop loss reinsurance protection provided by Hartford Fire, as well as by Moody's view that First State benefits from its membership in the Hartford Group.
The following rating was confirmed:
ITT Hartford Group, Inc. -- Prime-1 rating for short-term debt.
The following ratings were downgraded: ITT Hartford Group, Inc. -- senior debt to A2, from A1, senior debt under its shelf registration to (P)A2, from (P)A1, subordinated debt under its shelf registration to (P)A3, from (P)A2, and preferred stock under its shelf registration to (P)"a2", from (P)"a1".
Hartford Capital I and Hartford Capital II -- preferred stock to "a2", from "a1". Hartford Insurance Group intercompany pool members -- insurance financial strength to Aa3, from Aa2. The rated pool members are: Hartford Fire Insurance Company, Hartford Accident and Indemnity Company, Hartford Casualty Insurance Company, Hartford Insurance Company of Illinois, Hartford Insurance Company of the Midwest, Hartford Insurance Company of the Southeast, Hartford Lloyd's Insurance Company, Hartford Underwriters Insurance Company, Nutmeg Insurance Company, Pacific Insurance Company, Sentinel Insurance Company and Twin City Fire Insurance Company.
Hartford Life Insurance Company -- insurance financial strength to Aa3, from Aa2.
First State Group -- insurance financial strength to Baa2, from A3. The members of the group are: First State Insurance Company, New England Insurance Company, and New England Reinsurance Corporation. This does not affect the ongoing First State Management excess and surplus lines business written in ITT Hartford's intercompany P&C pool.
ITT Hartford Group, Inc., headquartered in Hartford, Connecticut, USA, reported consolidated assets and equity of $104.0 billion and $4.1 billion, respectively, as of September 30, 1996.
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