AM Best has affirmed the Long-Term Issuer Credit Rating
(Long-Term ICR) of “a-” and the Long- and Short-Term Issue Credit
Ratings (Long-Term IR; Short-Term IR) of The Hartford Financial
Services Group, Inc. (The Hartford) [NYSE: HIG], which is the
ultimate parent of the companies hereinafter mentioned. AM Best
also has affirmed the Financial Strength Rating (FSR) of A+
(Superior) and the Long-Term ICRs of “aa-” of Hartford Fire
Insurance Company and its pooling subsidiaries and affiliates,
collectively known as the Hartford Insurance Pool. Concurrently, AM
Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of
“a+” of Hartford Life and Accident Insurance Company (HLA). The
outlook of these Credit Ratings (ratings) is stable. All of the
above companies are headquartered in Hartford, CT.
At the same time, AM Best has upgraded the FSR to A+ (Superior)
from A (Excellent) and the Long-Term ICRs to “aa-” from “a+” of
Navigators Insurance Company and its wholly owned and 100%
reinsured subsidiary, Navigators Specialty Insurance Company,
collectively referred to as Navigators. Both companies are
domiciled in New York, NY. Concurrently, AM Best has upgraded the
Long-Term ICR to “a-” from “bbb+” and all existing Long-Term IRs of
The Navigators Group, Inc. (Delaware), a wholly owned downstream
holding of The Hartford. The outlook of these ratings has been
revised to stable from positive.
The ratings of the Hartford Insurance Pool reflect its balance
sheet strength, which AM Best categorizes as strongest, as well as
its adequate operating performance, favorable business profile and
appropriate enterprise risk management (ERM).
The balance sheet strength assessment is derived from
risk-adjusted capitalization at the strongest level, as measured by
Best’s Capital Adequacy Ratio (BCAR), which benefits from a high
credit quality investment portfolio and a comprehensive reinsurance
program with highly rated insurers. The pool’s balance sheet also
benefits from the financial flexibility afforded by the parent
company, which has access to the public debt and equity markets.
Partially offsetting these benefits are the adverse calendar-year
loss reserve development trends observed over the most recent
10-year period primarily related to asbestos and environmental
liabilities. However, at the end of 2016, the group entered into a
reinsurance agreement with National Indemnity Company to cover up
to $1.5 billion in future adverse loss reserve development in its
asbestos and environmental liabilities in order to mitigate further
uncertainty regarding these reserves.
The pool’s operating returns are in line with the averages for
the commercial casualty composite; however, returns have trended
less favorably in recent years. While the five-year average
combined ratio of 98.7% outperforms the commercial composite
average by 1.2 percentage points, underwriting results were
impacted negatively by catastrophe events in 2017 and 2018.
Investment income has been consistent, as growth in the long-term
bond portfolio was offset mostly by declining investment
yields.
The favorable business profile reflects the pool’s excellent
market position within the property/casualty industry, geographic
and product line diversity, experienced management team, generally
conservative operating fundamentals and diversified underwriting
initiatives, which provide balanced growth opportunities.
Management has executed various operating initiatives to focus
operations on small to middle commercial markets and personal lines
business that AM Best views as less volatile and provide
opportunities for profitable growth. The pool’s use of technology
platforms throughout the organization, localized support and
excellent service further strengthen its business profile.
ERM is viewed appropriate for the pool’s size and complexity of
its underwriting, investment and other risks based on its ERM
framework and controls.
The ratings of HLA reflect its balance sheet strength, which AM
Best categorizes as very strong, as well as its adequate operating
performance, favorable business profile and appropriate ERM. The
ratings also reflect the increased importance of HLA to the overall
Hartford organization, as well as the considerable scale and
capabilities that the Group Benefits segment has provided since the
acquisition of Aetna Inc.’s Group Benefits business.
HLA’s very strong balance sheet reflects its very strong
risk-adjusted capitalization, as measured by BCAR, as well as its
generally conservative invested assets and a modest amount of
operating leverage. AM Best notes that the business profile and the
overall profitability of the Group Benefits segment reflect the
increased scale since the acquisition of Aetna Inc.’s Group
Benefits business, which is now fully integrated into HLA’s
operations. As a result, AM Best believes that the company will
continue to report a favorable trend of revenue and earnings,
reflecting its favorable market position, as well as further invest
in technological capabilities and customer service
enhancements.
The ratings of Navigators reflect its balance sheet strength,
which AM Best categorizes as very strong, as well as its adequate
operating performance, favorable business profile and appropriate
ERM. Navigators’ ratings also reflect the implicit and explicit
support provided by The Harford, as well as the importance it will
play within the overall Hartford organization, following its
acquisition in May 2019.
The balance sheet strength assessment of Navigators is derived
from risk-adjusted capitalization at the very strong level, which
benefits from a high quality investment portfolio and strong
reinsurance protection. Navigators also maintains solid liquidity
measures, which compare favorably with the averages for the
commercial casualty composite.
Navigators historically reported profitable operating
performance, as evidenced by metrics over the recent five and
10-year periods. Average pre-tax operating returns during these
periods are generally in line with the averages for the commercial
casualty industry composite. Net investment income is solid and has
improved steadily over the past five years, supported by a high
quality investment portfolio. However, operating performance has
deteriorated recently, particularly other liability and ocean
marine business. This was driven largely by reserve strengthening
and costs related to an adverse development cover that was
purchased following the previously mentioned acquisition.
The favorable business profile reflects Navigators’ leading
position as a global provider of insurance to the marine sector,
the group’s well-diversified Specialty book of business, the
multi-channel distribution platform that utilizes global, national
and regional brokers, as well as wholesalers, and management’s
conservative approach to risk management, underwriting and claims
handling.
AM Best views Navigators’ ERM as appropriate for the group’s
size and complexity of its underwriting, investment and other risks
based on its ERM framework and controls.
The Hartford’s debt-to-total capital ratio (excluding
accumulated other comprehensive income) and interest coverage
ratios are generally within AM Best’s guidelines for its current
ratings. AM Best anticipates The Hartford will maintain solid
liquidity at the holding company to support any potential capital
needs of its operating subsidiaries.
A complete listing of The Hartford Financial Services Group,
Inc.’s FSRs, Long-Term ICRs and Short- and Long-Term IRs also is
available.
This press release relates to Credit Ratings that have been
published on AM Best’s website. For all rating information relating
to the release and pertinent disclosures, including details of the
office responsible for issuing each of the individual ratings
referenced in this release, please see AM Best’s Recent Rating
Activity web page. For additional information regarding the use and
limitations of Credit Rating opinions, please view Understanding
Best’s Credit Ratings. For information on the proper media use of
Best’s Credit Ratings and AM Best press releases, please view Guide
for Media - Proper Use of Best’s Credit Ratings and AM Best Rating
Action Press Releases.
AM Best is a global rating agency and information provider
with a unique focus on the insurance industry. Visit www.ambest.com
for more information.
Copyright © 2019 by AM Best Rating Services,
Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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version on businesswire.com: https://www.businesswire.com/news/home/20190830005362/en/
Lewis DeLosa, CFA Financial Analyst – P/C +1
908 439 2200, ext. 5529 lewis.delosa@ambest.com
Kate Steffanelli Senior Financial Analyst – L/H
+1 908 439 2200, ext. 5063 kate.steffanelli@ambest.com
Christopher Sharkey Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
Jim Peavy Director, Public Relations +1 908 439
2200, ext. 5644 james.peavy@ambest.com
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