Hartford Slashes Dividend 84% After Posting Loss (Update1)

By Andrew Frye
Bloomberg News
February 5, 2009

Feb. 5 (Bloomberg) -- Hartford Financial Services Group Inc., the Connecticut-based seller of life insurance and property coverage, plans to slash its dividend by 84 percent after posting a second straight loss on investment declines. The insurer dropped 13 percent in extended trading.

The net loss was $806 million, or $2.71 a share, compared with a profit of $595 million, or $1.88, in the year-earlier period, the company said today in a Business Wire statement. The loss excluding some investment results was 72 cents a share, missing the average estimate of $1.28 profit in a Bloomberg survey of analysts.

Chief Executive Officer Ramani Ayer is cutting jobs and seeking government aid to replace capital depleted by investment declines. He removed Chief Investment Officer David Znamierowski in October after soured bets on Lehman Brothers Holdings Inc. and Fannie Mae contributed to a $2.6 billion third-quarter loss.

"This was clearly the most challenging year in our company's nearly 200-year history," Ayer said in the statement.

The insurer slipped $2.03 to $13.06 at 5:47 p.m. in New York. Book value per share, a measure of assets minus liabilities, plunged 32 percent in three months to $28.53 as the company had about $600 million in investment losses.

The dividend will be cut to 5 cents a share, the second reduction in year, the company said. The payment in October was 53 cents a share.

Prudential, MetLife

Hartford and competing life insurers including No. 1 MetLife Inc. and Prudential Financial Inc. are bracing for further losses as the recession deepens and companies and consumers struggle to refinance their debt. Hartford, founded in 1810, has fallen about 81 percent in the last year on the New York Stock Exchange.

Life insurers lost $77 billion in surplus in 2008, erasing six years of gains, on investment declines and costs guaranteeing retirement products, according to consulting firm Conning & Co. Equity market drops weighed on results as sellers of variable annuities, including Hartford and Prudential, have had to carry more capital to cover guarantees made to customers based on the declines in stock indexes.

Capital Injection

Hartford, based in the city of the same name, is seeking as much as $3.4 billion from the U.S. Treasury's $700 billion rescue fund and agreed to buy a Sanford, Florida-based savings and loan to qualify for federal aid. In October, Ayer secured a $2.5 billion investment from Germany's Allianz SE to shore up Hartford's finances.

Prudential, the second-largest U.S. life insurer, posted a $1.57 billion fourth-quarter loss yesterday, its worst as a public company, on declines in Japanese stocks and subprime bonds and writedowns at variable annuity and real estate businesses.

MetLife said Feb. 3 that fourth-quarter profit fell 12 percent to $985 million on losses tied to hedge funds. New York- based MetLife's results included a gain of about $1.6 billion on derivatives, some of them tied to interest rates and currency fluctuations.

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