A.M. Best has upgraded the financial strength rating (FSR) to A
(Excellent) from A- (Excellent) and the issuer credit ratings (ICR) to
“a” from “a-” of Hartford Life and Accident Insurance Company
(HLA). A.M. Best also has affirmed the FSR of A- (Excellent) and the
ICRs of “a-” of Hartford Life Insurance Company (HLIC), Hartford
Life and Annuity Insurance Company and Hartford International
Life Reassurance Corporation (collectively referred to as Hartford
Life). The outlook for these ratings is stable. All companies are
headquartered in Hartford, CT.
In addition, A.M. Best has revised the outlook to positive from stable
and affirmed the ICR of “bbb-”for Hartford Life, Inc. and all
related debt. At the same time, A.M. Best has affirmed all debt ratings
of Hartford Life Global Funding Trusts, Hartford Life Institutional
Funding and HLIC. The outlook for these ratings is stable.
The upgrading of the ratings of HLA reflect its role as the provider of
group benefit products, improving results in its group lines and solid
market position in its chosen markets. The ratings also reflect the
recent restructuring of certain life insurance entities of The
Hartford Financial Services Group, Inc. (The Hartford) [NYSE: HIG],
which specifically for HLA, bifurcated its prior market and
interest-sensitive business lines though a legal entity separation.
Segregating this business from group benefits has further de-risked
HLA’s stand-alone business profile. As the group benefits segment builds
scale and continues to improve operating margins, A.M. Best believes its
contribution to the consolidated group will continue to grow from its
relatively modest levels. Additionally, group premiums have declined as
HLA has implemented pricing actions to improve profitability.
Given the upgrade, positive rating movement for HLA is unlikely in the
near term. Negative rating action may occur if there is deterioration in
the performance of its group benefits business, capitalization falls
below target levels or the strategic value of the group benefits segment
changes.
The affirmation of Hartford Life’s ratings reflects its adequate
capitalization, positive earnings reflecting favorable market conditions
and reduction in net amount at risk following higher lapses on inforce
policies. The ratings also reflect Hartford Life’s limited business
profile, represented by discontinued business lines (primarily fixed,
variable and institutional annuities) and the high level of interest
rate and market sensitivity inherent in these segments. While the recent
improvements in the equity markets has increased the runoff of variable
annuity policies, the earnings of Hartford Life will in turn decline as
a result of the lower asset base.
Another key component of risk reduction is an expansion of The
Hartford’s hedging program to include its Japanese variable annuity (VA)
business. The Hartford has historically employed a hedging program on
U.S. VA risks to address equity, interest rate and market volatility
risks. The expanded hedging program addresses those risks for the Japan
VA block, as well as associated foreign exchange risk. In addition,
risk-adjusted capital levels will likely be subject to continued
volatility given the company’s liability profile.
Given Hartford Life’s run-off strategy, positive rating movement for the
near to medium term is unlikely. A negative rating action could occur if
the company were to experience a material decline in capital and/or
operating earnings, or A.M. Best’s view of support from The Hartford
were to change.
The following debt ratings have been affirmed with a stable outlook:
Hartford Life Global Funding Trusts—
-- “a-” on all
outstanding notes issued under the program
Hartford Life Institutional Funding—
-- “a-” on all
outstanding notes issued under the program
Hartford Life Insurance Company (IncomeNotes)—
-- “bbb+” on
all outstanding notes issued under the program
The following debt ratings have been affirmed with the outlook revised
to positive from stable.
Hartford Life, Inc.—
-- “bbb-” on $250 million 7.65% senior
unsecured debentures, due 2027 (approximately $79 million outstanding)
--
“bbb-” on $400 million 7.375% senior unsecured notes, due 2031
(approximately $63 million outstanding)
The methodology used in determining these ratings is Best’s Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best’s rating process and contains the different rating criteria
employed in the rating process. Best’s Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world’s oldest and most authoritative
insurance rating and information source. For more information, visit www.ambest.com.
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