The downgrade of the p-c company is tied to weakness in the life operation, Moody's said, and the support the p-c operation is expected to give it.

The p-c company's credit profile is higher than the life branch reflecting its strong business profile and solid underwriting profitability and reserve adequacy, the rating service said.

"Moody's continues to believe a significant amount of support could be forthcoming from the p-c operations should additional capital be needed by the life operations," Jeff Berg, Moody's senior vice president, said in a statement. "Further deterioration in the stand-alone credit profile of the life companies could therefore result in a further downgrade of the p-c operations."

Investment losses on the p-c side exceeding $1 billion, which would inhibit organic growth, could result in a downgrade, Moody's said. The rating service noted the p-c operations do not have the same level of investment risk as the life operations.

Moody's cautioned that a problem with The Hartford's p-c investment portfolio is that while it has structured securities in the book, it also has invested more heavily in corporate debt and preferred stock than other insurers. Both classes of investment are expected to see increased defaults during the current recession, Moody's said.

However, the outlook for the p-c companies could return to stable if "investment losses are moderate and dividends to the parent are less than $500 million this year," which will enable the p-c company to retain capital.

Moody's said the life company is hurt by investment portfolio losses and losses in the variable annuity business in both the United States and Japan. Further downgrades could occur if these businesses continue to diminish and regulatory capital remains volatile.