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Friday, March 20, 2009

Recent AM BEST story on Hartford

OLDWICK, N.J.-- (BUSINESS WIRE) -- A.M. Best Co. has downgraded the
financial strength ratings (FSR) to A (Excellent) from A+ (Superior) and
the issuer credit ratings (ICR) to “a+” from “aa-” of the key
life/health (Hartford Life) insurance subsidiaries of The Hartford Financial Services
Group, Inc. (The Hartford) (Hartford, CT) [NYSE: HIG]. Concurrently, A.M.
Best has downgraded the ICR to “bbb+” from “a-” of Hartford Life, Inc.
The outlook for these ratings is negative.

A.M. Best also has downgraded the FSR to A (Excellent) from A+ (Superior)
and the ICR to “a+” from “aa-” of the key property/casualty (Hartford
Insurance Pool) insurance subsidiaries of The Hartford. The outlook for the
FSR is stable, while the outlook for the ICR is negative.

Concurrently, A.M. Best has downgraded the ICR to “bbb+” from “a-” of
The Hartford. The outlook for these ratings is negative. (Please see link below
for a detailed listing of all companies and ratings.)

The rating actions for Hartford Life reflect the recent performance of its
general account investment portfolio and retail variable annuity businesses
in light of the current economic environment. The rating actions also
reflect the potential for a material decline in the company’s risk-based
capital position should the current economic climate—particularly the
equity markets—continue to deteriorate. While operating and realized
capital losses in 2008 were offset by contributions from the holding
company, Hartford Life’s investment portfolio remains in a significant
unrealized loss position. A.M. Best believes that the company is exposed to
statutory reserve increases associated with its variable annuity lines,
particularly in light of the first quarter-to-date equity market
deterioration. In addition, A.M. Best remains concerned regarding future
deferred acquisition charge (DAC) unlocks in light of current market

A.M. Best also remains concerned over the future performance of Hartford
Life’s commercial mortgage investments—both whole loans and structured
securities—as it expects rising defaults in response to the deepening
recession. In general, A.M. Best is most cautious on retail, hotel and
office properties within close proximity to distressed housing markets
and/or labor markets where unemployment is high. While A.M. Best recognizes
that Hartford Life continues to actively monitor its investment exposures
utilizing credit protection and stress-testing them across a variety of
economic scenarios, the persistently negative economic climate suggests the
potential for additional asset impairments. A.M. Best notes that the
company’s earnings remain heavily correlated to the equity
markets—particularly within its retail variable annuity businesses—which
likely to cause further erosion in operating earnings.

Hartford Life’s ratings reflect its strong risk-based capital position at
year-end, as well as an increased level of liquidity at the operating
companies. The ratings also recognize Hartford Life’s significant market
position in several life insurance and retirement savings businesses (most
notably variable annuities), its diversified sources of revenues and
earnings and its broad multi-channel distribution platform. Additionally,
the ratings also incorporate the fact that The Hartford currently maintains
nearly $1.5 billion of liquid assets at the holding company to support its
debt service needs, as well as the near-term capital needs of its operating
companies. A.M. Best notes that The Hartford’s financial leverage
(including accumulated other comprehensive income [AOCI]) and coverage
ratios remain within A.M. Best’s guidelines for the current ratings,
despite a recent decline in fixed charge coverage driven by lower operating

The rating actions on Hartford Insurance Pool reflect the strain placed on
the overall enterprise from Hartford Life (these rating concerns are
indicated above) as well as the reduced financial flexibility of the
holding company. The Hartford Insurance Pool’s ratings recognize its
continued supportive risk-adjusted capitalization, strong underwriting
fundamentals and solid business position within the property/casualty
industry. These strengths are somewhat offset by the significant realized
and unrealized capital losses reported in 2008, $2.15 billion of dividends
taken out of the property/casualty companies, including $1.0 billion to
support the life/health operations, and continued softening throughout most
commercial lines. In addition, uncertainties exist regarding the potential
for continued investment losses due to volatile capital markets and the
further strain that this may place on risk-adjusted capitalization.
Further, A.M. Best remains concerned regarding the potential for additional
dividends out of the property/casualty companies should extraordinary
additional capital be provided to the life/health operations.

Nevertheless, the stable outlook on the Hartford Insurance Pool’s FSR
reflects A.M. Best’s view that it is well positioned to manage challenging
property/casualty market dynamics such as reduced pricing and increased
competition, due to its significant depth and breadth of operations,
generally conservative underwriting practices, effective utilization of
multiple distribution channels and supportive risk-adjusted capitalization.

For a complete listing of The Hartford Financial Services Group, Inc.’s
FSRs, ICRs and debt ratings, please visit

The principal methodologies used in determining these ratings, including
any additional methodologies and factors, which may have been considered,
can be found at

Founded in 1899, A.M. Best Company is a global full-service credit rating
organization dedicated to serving the financial and health care service
industries, including insurance companies, banks, hospitals and health care
system providers. For more information, visit

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