Hartford Reduces Year-End Capital Margin Forecast (Update1)
By Linda Shen
November 3, 2008
Nov. 3 (Bloomberg) -- Hartford Financial Services Group Inc., the insurer that got an investment from Germany's Allianz SE in October, said its year-end capital margin may be lower than previously forecast because of declining stock prices.
Hartford will have $2 billion more than required to qualify for an AA rating if the Standard & Poor's 500 Index is at 900 on Dec. 31, the insurer said in a statement today. That compares with a $3.5 billion estimate on Oct. 6, after the Allianz transaction was announced, a projection based on the S&P reaching at 1,165 at yearend.
Slumping equity markets are pressuring results at life insurers because they guarantee minimum payments on some stock- based retirement investments even when benchmark indexes fall. Hartford, based in the Connecticut city of the same name, recorded a $932 million charge tied to its retirement products in the third quarter. The S&P has plunged 34 percent this year.
Hartford is ``financially strong and well capitalized,'' and has ``access to additional sources of capital without tapping public markets or other capital raising options,'' the firm said.
Hartford advanced 89 cents, or 8.6 percent, to $11.21 in early trading at 8:24 a.m. in New York.
The insurer said it had access to a $500 million contingent credit facility and a $1.9 billion bank credit line and that property and casualty businesses would continue to have capital above the threshold for an AA rating.
Chief Executive Officer Ramani Ayer secured a $2.5 billion investment from Allianz last month to cushion against declines in the insurer's holdings. Hartford, whose stock is down 88 percent this year, was also rocked by the falling value of bonds tied to ailing financial companies. The insurer posted a $2.63 billion loss for the third quarter.
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