Moody's Affirms Hartford Post Mac Arthur

Moody's Affirms Hartford Post Mac Arthur

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

The Hartford currently has "A3" senior debt ratings from Moody's as well as "Aa3" insurance financial strength ratings for both its property-casualty and life insurance operating subsidiaries. The outlook for all of the ratings remains "negative," the New York-based ratings firm said.

The ratings affirmation follows The Hartford's announcement to pay $1.15 billion for a global settlement of all asbestos claims arising out of its historical insurance relationship with Mac Arthur Company.

The settlement calls for the Hartford, Conn.-based insurance giant to pay the full amount during the 2004 first quarter. The carrier intends to fund the cost of the settlement with its existing reserves for asbestos liabilities and thus incur no earnings charges.

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

Moody's also explained that its affirmation of the "negative" outlook for the p-c intercompany pool insurance financial strength ratings reflects "the burden on those operations" to fund charges and common dividends following The Hartford's asbestos charge during the 2003 first quarter and the subsequent recapitalization.

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