Hartford Wins State Reserve Relief, Boosting Surplus (Update1)
By Andrew Frye
February 12, 2009
Feb. 12 (Bloomberg) -- Hartford Financial Services Group Inc., the Connecticut-based insurer, won approval from state regulators to loosen reserve requirements after the declining value of assets pressured liquidity.
The relief will increase statutory surplus at life insurance operations by about $987 million, the company said today in a regulatory filing. Hartford also said it was ousted from the federal program that buys short-term debt because ratings firms downgraded the firm.
Insurers including Hartford and Allstate Corp. turned to their state regulators after losses on life insurance exceeded profits from property and casualty coverage. The relief from Connecticut allows Hartford greater use of anticipated tax benefits and increases funds available. Hartford had issued $375 million to the U.S. commercial paper program as of Dec. 31 before being expelled.
Hartford will have to repay the debt "from existing sources of liquidity," the filing said. "Future deterioration of our capital position at a time when we are unable to access the commercial paper markets due to prevailing market conditions could have a material adverse effect on our liquidity."
Hartford slipped 26 cents to $13.32 in early trading at 8:23 a.m. in New York. The insurer declined by more than 80 percent in the past 12 months.
The insurer was unprofitable the past two quarters, and has posted more than $10 billion in writedowns and unrealized losses tied to the collapse of the U.S. subprime mortgage market.
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