Rating agencies A.M. Best Co. and Standard & Poor's haverevised their outlook on The Hartford Financial Services Groupafter the company received a $2.5 billion cash infusion fromcompetitor Allianz AG in exchange for a stake in the firm.

A.M. Best Co. placed The Hartford's "A-plus" financial strength(FSR) ratings under review with negative implications. Best alsoplaced under review with negative implications the "a" issuercredit ratings (ICR) and all debt ratings of The Hartford, and the"aa-minus" ICR of the company's key life and health andproperty-casualty subsidiaries.

Standard & Poor's Ratings Services said it has revised itsoutlook on The Hartford to negative from stable but has affirmedthe company's "A" counterparty credit rating and the "AA-minus"counterparty credit and financial strength ratings on all of TheHartford's core insurance operating subsidiaries.

Both rating agencies cited circumstances surrounding TheHartford's deal with Allianz in which Allianz will receive a stakein The Hartford in exchange for a $2.5 billion cash infusion.

As reported yesterday by NU Online News Service, The Hartfordsought a cash infusion in advance of announcing projected lossesdue to the market turmoil.

Additionally, before the cash infusion announcement, Fitchratings had revised The Hartford's rating outlook from stable tonegative, citing potential troubled assets in its portfolios.

Best said it is "evaluating the ultimate impact of theseevents--as well as the risks associated with continued marketdislocation and increased financial leverage--on the ratings of TheHartford and its insurance subsidiaries."

Standard & Poor's said its adjustment is due to TheHartford's announcement that it expects to report "material assetimpairments estimated at $2.1 billion to $2.2 billion after taxesand will take a significant deferred acquisition cost (DAC)write-down estimated at $915 million."

The rating agency added, "The negative outlook on [The Hartford]reflects its reduced financial flexibility because of the increasein leverage and the associated material reduction in fixed-chargecoverage levels resulting from the high servicing costs on the[Allianz] investment and the expected softening of its operatingperformance."

The ratings and the outlook for The Hartford's core insurancesubsidiaries remain unchanged, Standard & Poor's said, because"the fundamentals" of the company's life and p-c operations remainstrong.

Standard & Poor's credit analyst Robert A. Hafner said heexpects The Hartford's operating performance to be strong but belowrecent record earnings because of the continuing soft market andhigher credit losses resulting from the economic downturn.

"The company's effective expense management and underwritingdiscipline will help support continued earnings strength and limitthe decline in earnings through the cycle," Standard & Poor'ssaid.

"In addition, management's aggressive action to raise $2.5billion of additional capital ensures that it is among the U.S.insurance companies best positioned to weather the current economicdownturn and maintain its competitive advantages and consumerconfidence," the rating service commented.