Mar. 19, 2010 (Business Wire) -- Fitch Ratings has assigned the following ratings to Hartford Financial Services Group, Inc.'s (HFSG) issuances:
Hartford Financial Services Group, Inc.
--$300 million 4.0% senior notes due 2015 'BBB-';
--$500 million 5.5% senior notes due 2020 'BBB-';
--$300 million 6.625% senior notes due 2040 'BBB-';
--$500 million 7.25% mandatory convertible preferred stock, series F 'BB'.
No action was taken on the ratings of HFSG and its primary life and property/casualty insurance subsidiaries. The Rating Outlook remains Negative.
This capital, in addition to a $1.45 million issuance of common stock and existing funds, will be utilized to repurchase HFSG's $3.4 billion of perpetual preferred stock issued in June 2009 under the U.S. Treasury's Capital Purchase Program (CPP) and pre-fund $675 million of debt maturities through 2012. Fitch has assigned a class E designation to the mandatory convertible preferred stock that allocates 100% of the principal to equity in evaluating financial leverage.
Overall, Fitch views the replacement of CPP funds with more permanent capital market financing as marginally positive in that it demonstrates an overall improved financial position and increased access to capital markets, although having the CPP capital on hand provided HFSG an additional cushion for near-term uncertainties. However, ultimately, it should reduce the potential negative impact to HFSG's business position, franchise value and management team, which are concerns for companies that operate under federal government support and related restrictions.
HFSG's equity credit adjusted debt-to-total capital ratio (including accumulated other comprehensive income [AOCI]) improved significantly to 19.2% at Dec. 31, 2009, down from 31.7% at Dec. 31, 2008. Following the $3.05 billion capital issuance and redemption of CPP, pro forma debt-to-total-capital increases to 24.2%, but remains below Fitch's expected range of 25%-30%. Fitch also expects HFSG to maintain GAAP operating earnings interest coverage of at least 3 times (x)-5x.
HFSG maintains financial flexibility with approximately $2.2 billion in holding company cash, fixed maturities and short-term investments at year-end 2009, and expects to have in excess of $1.8 billion following completion of the capital raise and CPP redemption, in addition to a $1.9 billion revolving credit facility and a $500 million contingent capital facility.
Applicable criteria available on Fitch's web site at www.fitchratings.com include:
--'Insurance Rating Methodology' (Dec. 29, 2009);
--'Non-Life Insurance Rating Criteria' (March 2, 2007);
--'Life Insurance Rating Criteria' (March 2, 2007);
--'Equity Credit for Hybrids & Other Capital Securities' (Dec. 29, 2009);
--'Rating Hybrid Securities' (Dec. 29, 2009);
--'Insurance Industry: Global Notching Methodology and Recovery Analysis' (Dec. 29, 2009).
Additional information is available at www.fitchratings.com.
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