A.M. Best Downgrades Credit Ratings of Members of Hartford Life Group; Places Under Review With Developing Implications

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best has downgraded the Financial Strength Rating to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “bbb+” from “a-” of Hartford Life Insurance Company and Hartford Life and Annuity Insurance Company (collectively referred to as Hartford Life Group). Additionally, A.M. Best has downgraded the Long-Term ICR to “bbb-” from “bbb” of Hartford Life, Inc. (HLI) (Delaware), along with its Long-Term Issue Credit Ratings (Long-Term IRs). Concurrently, A.M. Best has placed all Credit Ratings (ratings) for these entities under review with developing implications. Hartford Life Insurance Company and Hartford Life and Annuity Insurance Company are domiciled in Hartford, CT. (See below for a detailed listing of the Long-Term IRs.)

In addition, A.M. Best has commented that the ratings of The Hartford Financial Services Group, Inc. (The Hartford) [NYSE:HIG] and all other rated subsidiaries are unchanged by these rating actions.

The rating actions are in response to The Hartford’s announcement that it has entered into a definitive agreement to sell the Hartford Life Group entities that the company refers to as Talcott Resolution, to a group of investors led by Cornell Capital LLC, Atlas Merchant Capital LLC, TRB Advisors LP, Global Atlantic Financial Group Limited (Global Atlantic), Pine Brook and J. Safra Group. Total consideration to The Hartford is $2.05 billion, composed of cash from the investor group, a pre-closing cash dividend, debt that is included in the sale and a 9.7% ownership interest in the acquiring company. The close is estimated to occur in the first half of 2018, subject to regulatory approval. The Hartford’s Group Benefits and Mutual Funds subsidiaries, currently under HLI in the organizational structure, will be transferred to another subsidiary of The Hartford prior to close of the transaction. Additionally, Talcott Resolution will reinsure a material portion of its fixed annuity, payout annuity and structured settlement businesses to a subsidiary of Global Atlantic.

The rating downgrades reflect the fact that Hartford Life Group no longer is eligible for rating enhancement under A.M. Best’s Credit Rating Methodology. Additionally, the developing implications reflect the need for A.M. Best to assess the new ownership structure, their strategic plans for Hartford Life Group and the potential impact on the company’s rating fundamentals. A.M. Best expects to resolve the under review status of the ratings following discussions with the new ownership group and completion of the transaction.

While consolidated capitalization for The Hartford is expected to decline as a result of the transaction, A.M. Best acknowledges the benefits of the transaction including eliminating the impact of Talcott Resolution’s lower return on equity (ROE) and earnings on the consolidated ROE and earnings for the group, a reduction in exposure to equity, interest rate and investment risks, and the reduction in the size and complexity of the consolidated balance sheet including lower investments, reserves and debt-to-capital leverage. A.M. Best expects financial leverage and coverage measures at the holding company to remain within levels supportive of the current ratings.

Hartford Life, Inc.—

-- to “bbb-” from “bbb” on $250 million 7.65% senior unsecured debentures, due 2027 (approximately $80 million outstanding)

-- to “bbb-” from “bbb” on $400 million 7.375% senior unsecured notes, due 2031 (approximately $63 million outstanding)

Hartford Life Institutional Funding— to “bbb+ from “a-” on program rating

-- to “bbb+” from “a-” on all outstanding notes issued under the program

Hartford Life Insurance Company (IncomeNotes)—

-- to “bbb” from “bbb+” on all outstanding notes issued under the program

This press release relates to Credit Ratings that have been published on A.M. 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 A.M. 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 A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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A.M. Best

Kate Steffanelli, +1 908-439-2200, ext. 5063

Senior Financial Analyst — L/H

kate.steffanelli@ambest.com

or

Jonathan Harris, CFA, FRM, +1 908-439-2200, ext. 5771

Senior Financial Analyst — P/C

jonathan.harris@ambest.com

or

Christopher Sharkey, +1 908-439-2200, ext. 5159

Manager, Public Relations

christopher.sharkey@ambest.com

or

Jim Peavy, +1 908-439-2200, ext. 5644

Director, Public Relations

james.peavy@ambest.com

Source: A.M. Best