Summary
This 8-K filing from The Hartford Financial Services Group, Inc. (HIG) on November 3, 2008, provides an update on the company's capital position amidst significant market volatility. The report clarifies the company's approach to assessing its capital margin and introduces its strategy of using Risk-Based Capital (RBC) ratios for its life operations moving forward. This shift comes after previous disclosures about a $2.5 billion capital infusion from Allianz SE, which was intended to bolster capital levels.
Key Highlights
- 1The Hartford is changing its reporting metric for capital position in life operations from "capital margin" to "RBC ratio" due to market volatility and uncertainty in rating agency models.
- 2The company previously announced a $2.5 billion capital infusion from Allianz SE.
- 3Estimates indicate a capital margin of $3.5 billion assuming a year-end S&P 500 level of 1,165 (pro forma for Allianz investment), decreasing to approximately $2.0 billion if the S&P 500 closes at 900.
- 4The Hartford estimates its life insurance subsidiary, Hartford Life and Accident Insurance Company (HLA), would have an RBC ratio of approximately 440% if the S&P 500 closes at 900 and 345% if it closes at 800, assuming contributions from Allianz and property/casualty subsidiaries.
- 5These RBC estimates do not include the benefit of a $500 million contingent capital facility or a $1.9 billion revolving credit facility.
- 6The company's property and casualty subsidiaries are expected to remain capitalized at or above levels historically associated with "AA level" insurers under various scenarios.
- 7The company acknowledges that actual year-end RBC levels may differ materially from these estimates due to market inputs and actual performance.
Frequently Asked Questions
The company is shifting from reporting a "capital margin" to using "RBC ratios" for its life operations due to the complexity and uncertainty in estimating capital margins amidst severe increases in capital market volatility and challenges in applying rating agency models.
Allianz SE arranged a $2.5 billion capital infusion which is intended to bolster The Hartford's capital position. The company plans to contribute the net proceeds of this investment to Hartford Life and Accident Insurance Company (HLA) by the end of 2008.
The Hartford estimates that its life insurance subsidiary, HLA, would have an RBC ratio of approximately 440% if the S&P 500 closes the year at 900 and approximately 345% if it closes at 800. These figures assume contributions from the Allianz investment and property/casualty operations, but exclude potential impacts from fourth quarter credit issues and the utilization of credit facilities.
Yes, The Hartford maintains approximately $1.5 billion in capital resources from cash and short-term investments at the parent company and incremental capital in property and casualty subsidiaries. Additionally, the company can access a $500 million Glen Meadow trust contingent capital facility and has $1.9 billion available under its revolving credit facility.