Moody's Affirms Hartford Post Mac Arthur

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NU Online News Service, Dec. 23, 12:30 a.m.EST?Moody's Investors Service has affirmed its ratings onThe Hartford Financial Services Group, following its settlementinvolving Mac Arthur Company asbestos litigation, but cautionedthat the settlement raises a number of questions regarding TheHartford's asbestos position.[@@]

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The Hartford currently has "A3" senior debt ratings from Moody'sas well as "Aa3" insurance financial strength ratings for both itsproperty-casualty and life insurance operating subsidiaries. Theoutlook for all of the ratings remains "negative," the NewYork-based ratings firm said.

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The ratings affirmation follows The Hartford's announcement topay $1.15 billion for a global settlement of all asbestos claimsarising out of its historical insurance relationship with MacArthur Company.

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The settlement calls for the Hartford, Conn.-based insurancegiant to pay the full amount during the 2004 first quarter. Thecarrier intends to fund the cost of the settlement with itsexisting reserves for asbestos liabilities and thus incur noearnings charges.

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But Moody's expressed concern over the sheer size of thesettlement. The Hartford argued previously that it had fully paidthe limits on its primary general liability policies sold to theMac Arthur Company and its Western Mac Arthur unit, a formerdistributor and installer of asbestos products to shipyards,refineries and power plants. This raises concerns about thepossibility of further losses on other "fully paid" accounts or onaccounts with modest aggregate limits, Moody's said. And this $1.15billion settlement cost is already "quite substantial" relative toreserves The Hartford had set aside for asbestos claims as recentlyas one year ago.

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Moody's also explained that its affirmation of the "negative"outlook for the p-c intercompany pool insurance financial strengthratings reflects "the burden on those operations" to fund chargesand common dividends following The Hartford's asbestos chargeduring the 2003 first quarter and the subsequentrecapitalization.

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Last May, the insurer strengthened its asbestos reserves by $2.6billion and posted a $1.7 billion charge to its 2003 first-quarterearnings.

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