UPDATE 2-Hartford Posts Q4 Loss, To Cut Dividend
By Lilla Zuill
February 5, 2009
* Intends to cut dividend by 84 percent
* CEO calls 2008 company's "most challenging year"
* Shares fall 15 percent after earnings report (Adds financial detail, analyst comment, byline, updates share activity)
NEW YORK, Feb 5 (Reuters) - Hartford Financial Services Group Inc (HIG.N), the fourth largest U.S. insurer, said on Thursday it intends to slash its dividend by 84 percent and posted a fourth-quarter net loss, sending shares down 15 percent.
Hartford, seeking to preserve capital, said it intends to cut its dividend to 5 cents a share from 32 cents. Chief Executive Ramani Ayer called 2008 the 199-year old company's "most challenging year" ever.
However, Ayer said the insurer had taken steps to finish the year "well capitalized and well prepared to deliver on our commitments."
The net loss totaled $806 million, or $2.71 a share, compared with a profit of $595 million, or $1.88 a share, in the year-earlier quarter. Results were hurt by $610 million in net realized capital losses.
The company's core earnings, the measure most commonly tracked by analysts, translated into a loss of $208 million, or 72 cents a share.
Hartford's shares, down more than 80 percent in the last 12 months, fell 15 percent after the report. The stock has seen wild swings in recent months, losing about one-half of its value after posting a large third-quarter loss last October, then management soothed investors in December and shares more than doubled.
Hartford's latest report is likely to reawaken investor fears that the insurer will have to raise fresh capital, said Sterne Agee analyst John Nadel. Such a move, which would dilute shareholder stakes, would be tough to execute, given the frozen credit markets.
But concerns over capital adequacy could be well founded. Hartford projected Thursday it will end 2008 with a risk-based capital ratio, a key metric used by regulators, of 385 percent, much lower than it projected at an investor meeting in December.
"That calls into question the validity of management's estimates," Nadel added. "The stock is going significantly lower tomorrow," he added.
If the ratio falls too low, the company is at risk of credit rating downgrades that could lead to the loss of big insurance customers.
Shares were down 15 percent in post-market trading after closing up 3.6 percent in the regular session to $15.09.
Hartford has been raising prices on some retirement products, cutting jobs and reducing risk in its investment portfolio, seeking to preserve capital after poor investment results led to a $2.63 billion third-quarter loss.
In October the company raised $2.5 billion from German insurer Allianz SE (ALVG.DE).
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