The combined payment of $10 million to Hartford by three major insurers is a positive for Connecticut's capital city, said Moody’s Investors Service.
Aetna Inc., Hartford Financial Services Group Inc. and Travelers Cos., all based in Hartford, announced the first payment toward a five-year, $50 million pledge they made in 2017 to the teetering city, which was forced this year to accept state oversight when Connecticut took on responsibility for Hartford bond debt.
Moody’s likened the aid package to the auto industry’s support of Detroit's “grand bargain” to emerge from bankruptcy. There, the auto companies pledged $26 million.
The city’s $570 million budget for fiscal 2019, which Mayor Luke Bronin and the City Council finalized — and which state’s new Municipal Accountability Review Board must also approve — reflects that contribution.
“It demonstrates the insurers' support of the efforts to stabilize Hartford's precarious financial position and improve its economy,” Moody’s said.
Moody’s assigns the city its B2 issuer rating, while S&P Global Ratings assigns a BB-plus. Both are junk level.
The initial $10 million from the three companies covers the first year of the commitment, with follow-up to hinge on city progress toward fiscal sustainability.
Connecticut and Hartford in late March signed a so-called contract assistance agreement, which calls for the state to pay off the principal on Hartford’s roughly $540 million of GO debt over 20 to 30 years.
“Along with deep cuts to municipal spending, big contributions by our labor unions, and a new partnership with the state of Connecticut, the commitment of these three companies allows us to project fiscal stability for the next five years," Bronin said. “We now have to use that period of stability to focus on growth and true long-term sustainability for our capital city.”
Moody’s noted that Aetna, Travelers and The Hartford, three of the city’s largest taxpayers, remain at the core of the city's economic base, even after years of downsizing.
CVS Health said in January, after it announced its intention to acquire Aetna, that it would keep the company in Hartford rather than move it to New York. Aetna has roughly 4,000 workers in Hartford and 5,300 throughout Connecticut.
“While this year’s $10 million represents less than 2% of the state capital's fiscal 2019 budget, it will provide Hartford with some operating flexibility within the total budget with the option for any surplus to be made available for capital expenses,” said Moody’s.
Hartford and its insurance companies are collaborating to make the city a magnet for technological innovation. The insurance industry has supported the InsurTech Accelerator program to bring startup and technology talent to the city.
“However, the city cannot rely solely on the insurance industry for growth, needing to attract other industries and convince current ones to expand,” said Moody’s.