The Hartford’s debt exposure to Lehman Brothers is £124m and it has £19m in preferred stock. In addition it has £28m of unsecured counterparty exposure to Lehman in connection with derivatives transactions. It also has £75m of debt issued by operating subsidiaries of AIG.
The Hartford is exposed to senior debt issued by Lehman and AIG through credit default swaps totalling £17m and £40m respectively. As of June 30, the firm’s general account assets were $94.6bn.
Fitch has revised the rating outlook on the issuer default ratings, senior debt and ins- urer financial strength ratings for Hartford Financial Services Group and its life subsidiaries to negative from stable.
Fitch says the change reflects concerns over the firm’s financial profile, given the current challenges of the credit market environment.
The rating agency says Hartford’s life insurance operations have experienced a drop in capital levels caused by a deterioration in asset values and a decline in earnings, both of which are driven by weakened capital market conditions.
Fitch expects the firm’s large variable annuity book to be less profitable than previously expected in the near term.
But The Hartford UK managing director Michael Rudd says September saw the highest demand for variable annuities this year.
“We are seeing an increased demand for our variable annuity-style products, which are appreciating in value. They enable people to ride out these volatile market movements. People know that they can grab onto the upside when it arrives and that their income is guaranteed.”
He says consumers are not losing confidence in the guarantee provided on The Hartford’s products and insists there is no need for concern. He says: “We recognise the importance of our commitment to clients and are well capitalised to del-iver on those commitments.”
Chairman and chief executive officer Ramani Ayer says the recent volatility in the capital markets is trying and times have been worrying for customers, shareholders and employees.
He says: “We remain confident in the diversified oper-ating businesses that form the foundation of our com- pany. Our strong balance sheet, excellent insurance financial strength ratings and low debt to capitalisation ratio provide us with financial flexibility.”