Moody's Cuts Hartford, Cites Capital Concerns

by Karen Brettell
Reuters
February 6, 2009


NEW YORK, Feb 6 (Reuters) - Moody's Investors Service on Friday cut its ratings on The Hartford Financial Services Group Inc (HIG.N), citing capital concerns and the potential for further losses from the investment portfolio and the variable annuity business.

Moody's cut Hartford's long-term debt rating one notch to "Baa1," the eighth highest investment grade. The outlook is negative, indicating an additional downgrade may be likely over the coming 12-to-18 months.

The company's insurance financial strength rating was also cut one step to "A1," the fifth highest investment grade, from "Aa3."

Hartford's shares plunged 24.9 percent to $11.34 and its debt protection costs jumped on Friday as new capital concerns arose a day after the company reported disappointing fourth-quarter results and lowered a key capital estimate made just two months ago. For details, see [ID:nN06405623]

"Given the company's large variable annuity business, further deterioration in equity markets could have a magnified impact on capital and profitability at The Hartford vis-a-vis other highly rated insurers," Moody's said in a statement.

"The life insurance subsidiaries hold material levels of structured securities relative to capital," Moody's said.

Credit default swaps insuring Hartford's debt jumped to 674 basis points on Friday, or $674,000 per year for five years to insure $10 million in debt, from 647 basis points on Thursday, according to data by Markit Intraday.

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