A.M. Best Affirms Hartford Debt and Financial Strength Ratings.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--April 4, 2000 A.M. Best Co. has affirmed the debt and preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. ratings of Hartford Financial Services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. Group Inc. and Hartford Life Inc., as well as the financial strength ratings of their insurance subsidiaries. The affirmation follows the announcement that Hartford Financial has offered to purchase 18.5% of the minority interest shares of Hartford Life for approximately $1.1 billion. Hartford Life would become a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of Hartford Financial on completion of the proposed purchase. Although financing for the transaction has not been finalized See finalization. , A.M. Best expects the proposed purchase to result in additional financial leverage for Hartford Life. However, the financial strength and flexibility of the organization should allow management to lower the consolidated financial leverage and improve its fixed-charge coverage ratio Fixed-Charge Coverage Ratio A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated as the following: in the near-to medium-term to levels that would be in line with existing ratings. The organization's financial flexibility is derived from its market leadership position, excellent operating performance and diversified and sustainable earnings. The transaction further establishes Hartford Financial's position as one of the leading financial-services companies in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Its property/casualty operations are among the ten largest, based on annual net written premiums, and its life business is the leading writer of variable annuities Variable annuities Investment contracts whose issuer pays a periodic amount linked to the investment performance of an underlying portfolio. . Both Hartford Financial and Hartford Life have historically experienced above average profitability in comparison to their peers, based on strong operating fundamentals. The life business has grown significantly over the past five years as a result of increasing sales of variable annuity Variable Annuity An insurance contract in which, at the end of the accumulation stage, the insurance company guarantees a minimum payment. The remaining income payments can vary depending on the performance of the managed portfolio. products combined with management's success in increasing distribution relationships and reducing costs through building scale. While profits for Hartford Life's traditional products have increased modestly, margins have been maintained due to mature pricing and brand loyalty to the Hartford Life franchise. In addition to its leadership position in the individual annuity market, Hartford Life maintains strong franchises in individual life, group life and disability and group pension business that providing a diversified mix of revenue and earnings. Although the property/casualty market has been very competitive in the last several years and Hartford Financial's profits in this segment have not grown, margins have been maintained. This segment has reported profitability across lines of business such as personal auto, workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. , general liability, etc. The personal lines segment has reported good operating results under somewhat favorable market conditions. While maintaining sizeable premium volume in the intensely competitive middle-market and large-account commercial lines business, A.M. Best notes that the company has achieved above average results in its overall book of commercial lines business. These results have been accomplished through re-underwriting large- and middle-market business, and emphasizing growth in small commercial accounts. In addition to earnings diversification, A.M. Best views the property/casualty segment favorably due to its multiple distribution channels (direct response, independent agents and brokers), affinity endorsements (including the American Association of Retired Persons American Association of Retired Persons: see AARP. ) and strong brand recognition. A.M. Best believes Hartford Financial will sustain profitability in the competitive property/casualty market because of the company's disciplined underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. culture and strong market position. Offsetting these strengths is Hartford Life's relatively high level of deferred acquisition costs due to its rapid expansion. In addition, weak earnings could result in its variable annuity business due to a prolonged pro·long tr.v. pro·longed, pro·long·ing, pro·longs 1. To lengthen in duration; protract. 2. To lengthen in extent. underperforming equity market. Overall growth in the variable annuity market has caused increased competition and pressure on margins. In addition, the company's property/casualty operations are exposed to catastrophe losses and the possibility of additional asbestos and pollution claims. However, A.M. Best believes these risks are effectively managed. The Hartford Financial Services Group Inc., through its subsidiaries, provides life and property/casualty insurance to businesses and individuals in the United States and internationally. As of Dec. 31, 1999 the company reported generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting revenues of $13.5 billion and assets of $167.1 billion. The rating outlook is stable. The following debt ratings are affirmed for Hartford Financial Services Group Inc: - a+ rating on senior debt - Hartford Capital I --a+ rating on preferred securities - Hartford Capital II--a+ rating on preferred securities The following debt ratings are affirmed for Hartford Life Inc.: - Hartford Life Inc.--a+ rating on senior debt. - Hartford Life Capital I--a+ rating on preferred securities. The financial strength ratings of the following Hartford Life companies are affirmed: - American Maturity Life Insurance Co.--A+ (Superior). - Hartford Life and Accident Insurance Co.--A+. - Hartford Life and Annuity Insurance Co.--A+. - Hartford Life Insurance Co.--A+. - Hartford International Life Reassurance Corp.--A (Excellent) The A+ financial strength rating of the Hartford Insurance Pool, its members and reinsured core affiliates--insurance subsidiaries of Hartford Financial Services Group Inc.--is affirmed: - Hartford Fire Insurance Co. - Hartford Accident & Indemnity Co. - Hartford Insurance Company of Illinois - Hartford Casualty Insurance Co. - Hartford Underwriters Insurance Co. - Hartford Insurance Company of Midwest - Hartford Insurance Company of Southeast - Hartford Lloyd's Insurance Co. - Pacific Insurance Co., Ltd. - Twin City Fire Insurance Co. - Nutmeg nutmeg, name applied to members of the family Myristicaceae. The true nutmeg (Myristica fragrans) is an evergreen tree native to the Moluccas but now cultivated elsewhere in the tropics and to a limited extent in S Florida. Insurance Co. - Trumbull Insurance Co. - Property & Casualty Insurance Co. of Hartford - Sentinel Insurance Co., Ltd. - Hartford Fire Insurance Company CAB - Hartford Insurance Company of Canada The financial strength ratings of the following insurance subsidiaries of Hartford Financial Services Group Inc. are affirmed: - Omni Indemnity Co.--A- (Excellent) - Omni Insurance Co.--A- - First State Insurance Co.--B+ (Very Good) - New England New England, name applied to the region comprising six states of the NE United States—Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, and Connecticut. The region is thought to have been so named by Capt. Insurance Co.--B+ - New England Reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. Corp.--B+ A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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