Moody’s Investors Service lowered its credit ratings on Hartford Financial Services Group Inc. and its subsidiaries this morning, following the company’s announcement late Thursday of weak fourth-quarter results. Capital losses and write-downs in its annuities business surged.
Moody’s said, “The risk of further investment losses and diminished earnings is meaningful in view of unsettled markets and deteriorating economic conditions.”
The Hartford’s stock traded at $11.27, down $3.82, or 25.31 percent, at 11:20.
After the market closed Thursday, the company announced disappointing earnings and an 84 percent cut in its dividend. The Hartford reported a loss of $806 million, or $2.71 per share, for the final three months of 2008. The loss included a $610 million realized capital loss and another $597 million loss tied to the write-off of goodwill.
Moody’s lowered The Hartford’s long-term senior debt rating one notch to Baa1, denoting below-average credit quality. It also gave downgrades to the company’s property-and-casualty and life-insurance subsidiaries to A1, removing them from high-credit-quality territory. All of the ratings have negative outlooks, meaning more downgrades aren’t out of the question.
Analysts were less focused on the fourth-quarter loss than on the risk-based capital ratio, which is a key figure for insurance companies’ ability to maintain strong credit ratings.
Citi Investment Research analyst Joshua Shanker wrote in a research note that the company’s 385 percent ratio falls well short of the more than 400 percent ratio that was estimated in early December, and he predicted ratings downgrades.
A strong credit rating is important for insurance firms to generate new business and make borrowing cash less expensive. (AP)
