A.M. Best Downgrades Ratings of The Hartford Financial Services Group, Inc. and Its Subsidiaries

Fri Feb 27, 2009 5:36pm EST

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OLDWICK, N.J.--(Business Wire)--
A.M. Best Co. has downgraded the financial strength ratings (FSR) to A
(Excellent) from A+ (Superior) and the issuer credit ratings (ICR) to "a+" from
"aa-" of the key life/health (Hartford Life) insurance subsidiaries of The
Hartford Financial Services Group, Inc. (The Hartford) (Hartford, CT) [NYSE:
HIG]. Concurrently, A.M. Best has downgraded the ICR to "bbb+" from "a-" of
Hartford Life, Inc. The outlook for these ratings is negative. 

A.M. Best also has downgraded the FSR to A (Excellent) from A+ (Superior) and
the ICR to "a+" from "aa-" of the key property/casualty (Hartford Insurance
Pool) insurance subsidiaries of The Hartford. The outlook for the FSR is stable,
while the outlook for the ICR is negative. 

Concurrently, A.M. Best has downgraded the ICR to "bbb+" from "a-" ofThe
Hartford. The outlook for these ratings is negative. (Please see link below for
a detailed listing of all companies and ratings.) 

The rating actions for Hartford Life reflect the recent performance of its
general account investment portfolio and retail variable annuity businesses in
light of the current economic environment. The rating actions also reflect the
potential for a material decline in the company`s risk-based capital position
should the current economic climate-particularly the equity markets-continue to
deteriorate. While operating and realized capital losses in 2008 were offset by
contributions from the holding company, Hartford Life`s investment portfolio
remains in a significant unrealized loss position. A.M. Best believes that the
company is exposed to statutory reserve increases associated with its variable
annuity lines, particularly in light of the first quarter-to-date equity market
deterioration. In addition, A.M. Best remains concerned regarding future
deferred acquisition charge (DAC) unlocks in light of current market conditions.

A.M. Best also remains concerned over the future performance of Hartford Life`s
commercial mortgage investments-both whole loans and structured securities-as it
expects rising defaults in response to the deepening recession. In general, A.M.
Best is most cautious on retail, hotel and office properties within close
proximity to distressed housing markets and/or labor markets where unemployment
is high. While A.M. Best recognizes that Hartford Life continues to actively
monitor its investment exposures utilizing credit protection and stress-testing
them across a variety of economic scenarios, the persistently negative economic
climate suggests the potential for additional asset impairments. A.M. Best notes
that the company`s earnings remain heavily correlated to the equity
markets-particularly within its retail variable annuity businesses-which is
likely to cause further erosion in operating earnings. 

Hartford Life`s ratings reflect its strong risk-based capital position at
year-end, as well as an increased level of liquidity at the operating companies.
The ratings also recognize Hartford Life`s significant market position in
several life insurance and retirement savings businesses (most notably variable
annuities), its diversified sources of revenues and earnings and its broad
multi-channel distribution platform. Additionally, the ratings also incorporate
the fact that The Hartford currently maintains nearly $1.5 billion of liquid
assets at the holding company to support its debt service needs, as well as the
near-term capital needs of its operating companies. A.M. Best notes that The
Hartford`s financial leverage (including accumulated other comprehensive income
[AOCI]) and coverage ratios remain within A.M. Best`s guidelines for the current
ratings, despite a recent decline in fixed charge coverage driven by lower
operating earnings. 

The rating actions on Hartford Insurance Pool reflect the strain placed on the
overall enterprise from Hartford Life (these rating concerns are indicated
above) as well as the reduced financial flexibility of the holding company. The
Hartford Insurance Pool`s ratings recognize its continued supportive
risk-adjusted capitalization, strong underwriting fundamentals and solid
business position within the property/casualty industry. These strengths are
somewhat offset by the significant realized and unrealized capital losses
reported in 2008, $2.15 billion of dividends taken out of the property/casualty
companies, including $1.0 billion to support the life/health operations, and
continued softening throughout most commercial lines. In addition, uncertainties
exist regarding the potential for continued investment losses due to volatile
capital markets and the further strain that this may place on risk-adjusted
capitalization. Further, A.M. Best remains concerned regarding the potential for
additional dividends out of the property/casualty companies should extraordinary
additional capital be provided to the life/health operations. 

Nevertheless, the stable outlook on the Hartford Insurance Pool`s FSR reflects
A.M. Best`s view that it is well positioned to manage challenging
property/casualty market dynamics such as reduced pricing and increased
competition, due to its significant depth and breadth of operations, generally
conservative underwriting practices, effective utilization of multiple
distribution channels and supportive risk-adjusted capitalization. 

For a complete listing ofThe Hartford Financial Services Group, Inc.`s FSRs,
ICRs and debt ratings, please visitwww.ambest.com/press/022713hartford.pdf. 

The principal methodologies used in determining these ratings, including any
additional methodologies and factors, which may have been considered, can be
found at www.ambest.com/ratings/methodology. 

Founded in 1899, A.M. Best Company is a global full-service credit rating
organization dedicated to serving the financial and health care service
industries, including insurance companies, banks, hospitals and health care
system providers. For more information, visit www.ambest.com. 

A.M. Best Co.
Sharon Pereira -P/C, 908-439-2200, ext. 5520
Thomas Rosendale -L/H, 908-439-2200, ext. 5201
Public Relations
Jim Peavy, 908-439-2200, ext. 5644
Rachelle Morrow, 908-439-2200, ext. 5378

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