The Connecticut Insurance Department has approved The Hartford Financial Services Group's request for relief from two capital requirements, which the company said has resulted in a $987 million increase to its life operations' estimated statutory surplus.
Last Friday Hartford chief financial officer Lizabeth H. Zlatkus said in a conference call the company had requested "AG39 relief from our year-end reserve calculation from the Connecticut Department of insurance."
Hartford spokesperson Shannon Lapierre described AG39 as a variable annuity cash flow test requirement.
Ms. Zlatkus said the company also submitted a permitted practice request related to the admissibility of deferred tax assets.
The Hartford said it received department approval in an SEC filing today.
In the same filing, the company noted downgrades to its commercial paper by Moody's, S&P, and Fitch and have rendered The Hartford ineligible to sell commercial paper to a Federal Reserve Board facility.
"On October 7, 2008, The Federal Reserve Board authorized the Commercial Paper Funding Facility (CPFF) to improve liquidity in short-term funding markets by increasing the availability of term commercial paper funding to issuers and by providing greater assurance to both issuers and investors that firms will be able to roll over their maturing commercial paper," the filing states.
The Hartford said it registered with the CPFF in order to sell up to a maximum of $375 million to the facility. But the commercial paper must be rated A-1/P-1/F1 by at least two rating agencies to be eligible.
The Hartford said, "As a result, we will be required to pay the maturing commercial paper issued under the CPFF program from existing sources of liquidity.
"Future deterioration of our capital position at a time when we are unable to access the commercial paper markets due to prevailing market conditions could have a material adverse effect on our liquidity."
Speaking to the effects of the global financial markets and economic conditions in general on the company, The Hartford said in the filing it expects continued pressure on its capital position in 2009.
"Further significant declines in our capital position could impair our ability to support the scale of our business as currently constituted and to absorb continuing operating losses and liabilities under our customer contracts and our overall competitiveness," The Hartford said.
The Hartford said in its filing it has taken steps to preserve capital and mitigate risks, "among them launching a range of initiatives to reduce risks associated with our various lines of business, applying for federal funds under the Emergency Economic Stabilization Act of 2008 ("EESA") and looking across the enterprise for additional opportunities to reduce risk."
(Phil Gusman may be reached at pgusman@nuco.com, 201-526-2346)
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