Standard & Poor's Downgrades Ratings Of The Hartford, Phoenix Cos.
March 03, 2009
Standard & Poor's has downgraded ratings of The Hartford and The Phoenix Cos. and warned of potential damage to The Hartford's well-known brand.
S&P lowered The Hartford Financial Services Group's BBB+ credit rating Tuesday to BBB, still in the "adequate" range, and dropped credit and financial strength ratings on subsidiaries to A from A+, still in the "strong" range. It was the third time in a month that S&P downgraded credit ratings of the parent company.
The rating agency said The Hartford's earnings, capital, and financial flexibility "have been weakened considerably" by the deepening stock market decline, volatility, and significant asset impairments in the past two quarters.
"We believe the uncertainty of this financial stress could erode Hartford's brand and diverse competitive advantages, particularly in certain lines of business," S&P said.
The outlook on the ratings is negative because The Hartford's flexibility is constrained in funding potential future capital needs, especially at Hartford Life S&P explained.
The Hartford, which reported a $2.7 billion net loss for 2008, has been hurt by reserve needs for its variable annuity business and deep investment losses.
S&P lowered ratings on The Phoenix Cos. Monday, citing the Hartford-based company's weakened competitive position and operating performance, as well as reduced financial flexibility and capital.
S&P lowered a BB+ credit rating on The Phoenix Cos. to BB, still in the speculative or "junk" range, and reduced financial strength ratings on operating subsidiaries to BBB from BBB+, still in the "good" range.
S&P's outlook on Phoenix's ratings is negative.
"We lowered our ratings to reflect Phoenix's weakened competitive position, as evidenced by declining life insurance sales and new annuity deposits," said S&P credit analyst Adrian Pask.
S&P said although layoffs announced Friday will lower personnel expenses, they may also reduce Phoenix's ability to bring in new business, "which could put further pressure on its competitive position."
Phoenix reported large net losses Friday for the fourth quarter and full year 2008 and is cutting more than 250 jobs or about 25 percent of its 1,100 employees nationwide.
The rating agency had put Phoenix on CreditWatch Feb. 10 for possible downgrade.
Reprinted with permission of the Hartford Courant.
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