Although A.M. Best Co. recently rated
The Hartford Financial Services Group, Inc.
) and its subsidiaries positively, it failed to pull up the
shares of the company. In fact, shares fell almost 2% to $35.37
on Apr 4, 2014, due to broader market conditions.
Last week, the credit rating agency affirmed the financial
strength rating (FSR) and issuer credit ratings (ICR) of Hartford
Insurance Pool (comprising Hartford Fire Insurance Company and
its pooling subsidiaries and affiliates) at "A" and "a+",
respectively. Moreover, the ICR of the holding company was
affirmed at "bbb+" along with the debt ratings. The outlook for
all the ratings were raised to positive from stable.
The FSR and ICR affirmation on the Hartford Insurance Pool came
on the back of strong risk-adjusted capitalization, underwriting
and operating strength and solid market position in the property
and casualty business. A.M. Best stated that the geographic
presence and product line diversity, a strong team of veterans in
the space and broad underwriting initiatives position the company
to generate balanced growth going forward. Although natural
disasters over the past few years have impacted the pool's
results, they remain in line with A.M. Best's expectations.
Nevertheless, the rating agency identified that weather-related
losses over the past few years have adversely impacted operating
performance at higher than historical levels.
The upward revision in the ratings outlook came on the back of
Hartford's risk reduction in its variable annuity (VA) block of
business. A.M. Best remained optimistic about the near-term
prospects of Hartford as the company is expected to generate
impressive earnings, de-risk its portfolio and consistently pay
dividends. Moreover, the company is cushioned from equity,
interest rate and foreign exchange fluctuations owing to its
hedging program. Hartford's debt-to-capital ratio also remains
within A.M Best's ratings guidelines and the agency expects the
company to maintain strong liquidity going forward.
A.M. best also stated that the ratings on Hartford Insurance Pool
is liable to an upgrade if the company succeeds in reducing risks
related to its VA block of business. Alongside, if the company
moves to a level of underwriting and operating performance that
is considerably better than its peers, the agency might confer
more positive ratings. On the other hand, a ratings downgrade is
possible in case of poor operating performance, resulting in
deterioration in risk-adjusted capitalization.
Rating affirmations or upgrades play an important part in
retaining investor confidence in the stock as well as maintaining
creditworthiness in the market. We believe that Hartford's
present score with the credit rating agency will help it write
more business going forward.
Hartford currently carries a Zacks Rank #3 (Hold). However,
some better-ranked stocks in the insurance sector include
AmTrust Financial Services Inc.
EMC Insurance Group Inc.
). All three stocks carry a Zacks Rank #1 (Strong
AMTRUST FIN SVC (AFSI): Free Stock Analysis
EMC INSURANCE (EMCI): Free Stock Analysis
HARTFORD FIN SV (HIG): Free Stock Analysis
ALLEGHANY CORP (Y): Free Stock Analysis
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