Hartford Falls After Ouster From U.S. Commercial Paper Program
By Andrew Frye
February 12, 2009
Feb. 12 (Bloomberg) -- Hartford Financial Services Group Inc., the insurer that lost $2.75 billion last year, dropped 7.8 percent in New York trading after being ousted from the federal program that buys short-term debt.
The insurer, which was excluded after its credit ratings were downgraded, will have to repay the $375 million in commercial paper "from existing sources of liquidity," the company said in its annual report today. "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."
The insurer joins money-losing competitor Genworth Financial Inc. in losing eligibility for the emergency program, created last year when credit markets seized up. Hartford, based in the Connecticut city of the same name, was downgraded by ratings firms after more than $10 billion in losses and writedowns tied to the collapse of the subprime mortgage market.
The insurer fell $1.06 to $12.52 at 10:47 a.m. in New York Stock Exchange composite trading and has plunged 83 percent in the last 12 months, compared with the 90 percent slide at Richmond, Virginia-based Genworth.
Hartford, founded in 1810, has cut 500 jobs and applied to the government's Troubled Assets Relief Program to replace capital lost on declines in mortgage-backed securities and commercial debt. Last week, Hartford slashed its dividend 84 percent to 5 cents after missing its own target for a measure of financial strength called the risk-based capital ratio.
"This was clearly the most challenging year in our company's nearly 200-year history," Chief Executive Officer Ramani Ayer said of 2008 in a statement on Feb. 5.
Hartford improved its liquidity position by winning permission from the regulator in its home state to reduce reserves, according to today's filing. Hartford increased the statutory surplus at its life insurance operations by about $987 million after Connecticut Insurance Commissioner Thomas Sullivan allowed the company greater use of anticipated tax benefits.
Insurers including Hartford and Allstate Corp. turned to their state regulators after losses on life insurance exceeded profits from property and casualty coverage.
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