A.M. Best Assigns Initial Debt Rating to Hartford's Equity Units.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Sept. 9, 2002 A.M. Best Co. has assigned as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. an initial "a+" senior debt rating to 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.'s (NYSE NYSE See: New York Stock Exchange : HIG HIG Human immunoglobulin, see there ) (Hartford, CT) $300 million of Equity Units (EU). Each EU consists of a stock purchase contract under which investors agree to purchase Hartford's common stock in four years and a six-year senior note. In addition to the EUs, Hartford is concurrently issuing $300 million of common equity under the company's existing $2.3 billion shelf registration. Of the $600 million of immediate proceeds, $300 million will be contributed as surplus to the property/casualty subsidiaries while the balance will be held at the holding company. The rating reflects the company's overall financial stability and operational excellence. Management has a proven ability to execute sound business fundamentals business fundamentals The general background within which an economy operates including earnings, sales, wage rates, taxes, and inflation. Improving business fundamentals are generally viewed as bullish for stocks, although stock prices at any given point and strategic direction, which is critical in the current low interest rate environment. The depressed equity market conditions may exert negative pressure on the future results of the company's market-leading 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. business. Nevertheless, A.M. Best believes Hartford's significant ongoing earnings generation capability within its diversified diversified (di·verˑ·s business platform provide it the flexibility required to withstand the pressure resulting from the equity markets. Management recently increased asbestos asbestos, mineral asbestos, common name for any of a variety of silicate minerals within the amphibole and serpentine groups that are fibrous in structure and more or less resistant to acid and fire. and environmental (A&E) reserves by reallocating $600 million of "all other" reserves. Hartford has substantial exposure to emerging A&E claims, and given the uncertainty regarding these claims, A.M. Best remains concerned about A&E liabilities, which is reflected in the current rating. The issue of common and EUs will slightly impact Hartford's financial leverage, which has historically been at the high end of A.M. Best's tolerance for the company's ratings. That tolerance has been supported by Hartford's consistent earnings capability, diversified business platform and ready access to the capital markets. Of greater consideration is Hartford's historically low level of holding company liquidity. Cash flow to cover fixed charges -- at approximately 2.4 times -- is thin for the rating. Management has proactively addressed this concern with the addition of $300 million of liquidity and significant subsidiary dividend capacity. The following initial debt rating has been assigned: Hartford Financial Services Group, Inc.-- -- "a+" senior debt rating to $300 million Equity Units, due 2008 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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