For the second time in less than a month, Phoenix Cos. CEO James Wehr says he disagrees with a rating agencies decision to downgrade the Hartford insurer’s credit.
Moody’s Investors Service downgraded Phoenix’s senior debt rating to junk-bond status, which indicates that it may have a higher risk of default due to the company’s declining capital.
In August, Standard & Poor’s Corp. cut credit ratings for Phoenix and several of its subsidiaries a day after the company reported a $111 million loss for the second quarter on declining sales.
“We respectfully disagree with Moody`s action,” Wehr said in a statement. “However, given the environment in which rating agencies are now operating, we are not surprised by it.”
Moody’s downgraded the company’s senior debt rating to “B1” from “Ba2,” and also cut the insurance financial strength rating of the company’s life insurance subsidiaries.
Moody’s said in a statement the outlook is negative, reflecting “the challenges that management faces in maintaining the company’s liquidity position without overly compromising investment earnings, the pace of negative cash flows from the company’s in-force block, as well as concerns about the ability of the company to stabilize and improve its capital position given its weak earnings capacity.”
Wehr said Phoenix is “a work in progress and that the company is committed to maintaining a healthy balance sheet and policyholder security, while it reduces expenses and pursues a new business strategy that recognizes the realities of these ratings.
“We remain confident that we will succeed in re-positioning Phoenix,” Wehr said.
