Moody's cuts Hartford Financial ratings by one notch

NEW YORK Nov 3 (Reuters) - Moody's Investors Service on Monday cut its rating on insurer Hartford Financial Services Group Inc, citing weakness at the company's life insurance business following the recent turmoil in financial markets.

The agency cut the company's senior unsecured debt rating by one notch to "A3", or seventh-highest investment grade. The outlook is stable.

At the same time, Moody's affirmed its "Aa3" insurance financial strength ratings for the company's main property and casualty units and life insurance operations. But it maintained a negative outlook on the life businesses, meaning it could downgrade them within the next two years.

The move came as Hartford (HIG.N) insisted its property and casualty businesses will remain well capitalized, causing its shares to rally. The shares shed a full 52 percent of their value in one session last week amid worry about the company's capital position. For details, see [ID:nN03306388]

Fitch Ratings downgraded the company's debt on Friday.

Moody's had placed Hartford's ratings on review for possible downgrade on Oct. l8, citing worries about the weakening credit profile of its life insurance units, which account for about half its business units.

"The Hartford's recently released final third-quarter results and continuing weakness in both credit and equity markets have confirmed our concerns," analyst Jeffrey Berg said in a note.

The life insurance units may be facing significant losses from structured securities and financial institution bonds and preferred stock, said the analyst. They are also vulnerable to losses in the stock market because of their large variable annuity business.

Any further deterioration of their credit profile could trigger a downgrade for the life insurance companies. Specifically, credit impairments of more than $750 million on a pretax basis in the coming quarters or a 20 percent decline in core earnings could prompt Moody's to act. (Reporting by Ciara Linnane; Editing by Dan Grebler)