Hartford to Lower Estimate of Capital Position
November 9, 2008
The drop in the S&P 500 Index during October has forced Hartford Financial Services Group, Inc., to lower an earlier estimate of its projected year-end capital margin, the company reported.
Hartford filed a Form 8-K with the Securities and Exchange Commission on November 3, predicting that its capital margin—capital above what is required to maintain an AA strength rating—would be about $2 billion at the end of 2008, not the $3.5 billion estimated on October 6.
The prior estimate, published immediately after Allianz SE invested $2.5 billion in Hartford, assumed that the S&P 500 Index would remain at its September 30 level, 1165, through year-end. The new estimate assumes that the index will be 900 at year-end.
The company also indicated the company’s estimated year-end risk-based capital (RBC) ratio for Hartford Life and Accident Insurance Company (HLA) at various S&P 500 levels. An RBC ratio of 325 percent or higher has historically been associated by various rating agencies with AA level ratings.
“The Hartford is financially strong and well capitalized,” said Ramani Ayer, The Hartford’s chairman and chief executive officer.
“The company’s RBC ratio, including a number of provisions, is estimated to be above 400 percent at year-end S&P 500 levels of 900. Our capital position is more than sufficient for current market conditions and in the event markets deteriorate further.
“In addition, should market conditions become more severe, we have access to additional sources of capital without tapping public markets or other capital raising options. These sources include capital in the parent company and the property and casualty subsidiaries, a $500 million contingent capital facility and a $1.9 billion bank credit facility,” he said.
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