The Hartford Confirms It May Sell Or Close Some Units As It Bolsters Finances
May 1, 2009
May 1--The Hartford, reporting a quarterly loss of $1.2 billion Thursday, confirmed it might sell or discontinue various businesses and said it's curtailing sales in major markets abroad as it strives to bolster its financial position.
The company, which laid off 500 employees late last year including roughly 125 in Connecticut, is also expected to cut hundreds more jobs companywide this year -- scores of them in Connecticut. The company, however, wouldn't comment on numbers Thursday.
Although The Hartford Financial Services Group has refused comment on reports it is seeking bids for its property-casualty insurance operations -- the stronger side of its business -- its disclosures Thursday make clear that a break-up of the 199-year-old company is a possibility.
Published reports last week said The Hartford is seeking bids from Travelers and other companies for its property-casualty unit. A sale of the unit raises the specter of potentially heavy job cuts -- depending on the buyer's business mix -- because thousands of the company's 12,500 employees in the Hartford region work in the property-casualty business.
The company was also reported to have tried negotiating a sale of its life operations with MetLife and then Canada's Sun Life Financial, but The Hartford never confirmed that, and no deal emerged.
Heavy investment losses, especially in the life and annuity business, have eaten away at The Hartford's bottom line. Volatile stock and credit markets have also battered the company's variable annuity business.
The Hartford said in a quarterly report after stock markets closed Thursday that it's exploring the "restructuring, discontinuation or disposition of various business lines." However, the company noted in a press release, "we may determine that the best course for The Hartford is to continue with a diversified business model."
Having life insurance and other financial products, as well as property and casualty insurance for homes, vehicles and businesses, is what makes The Hartford diversified.
The wild card for The Hartford -- one that may be delaying big decisions -- is whether it will get federal bailout funds it applied for, and how much, and whether the company would accept the terms of the Troubled Asset Relief Program, TARP, money.
The Hartford received a $2.5 billion capital infusion in October from German insurer Allianz, which got the right to acquire nearly 24 percent of the company. That hasn't been enough cash, though, as markets deteriorated and the company's financial ratings were downgraded repeatedly.
"The financial markets remain difficult and the outlook for the economy is uncertain," The Hartford's CEO Ramani Ayer said Thursday. "In light of these conditions, even as a well capitalized company, we are taking additional measures" to stabilize ratings and preserve capital.
Among those steps, The Hartford is "pursuing options" for its Institutional Markets business, a part of the life operations that sells corporate-owned and bank-owned life insurance. That business also sells structured settlements -- a way that settlements in personal injury lawsuits and other claims are paid.
The company also said it is suspending all new sales starting June 1 in Japan, where it has more than 500,000 policies in force. It has also decided to halt sales in the United Kingdom and won't proceed with plans to launch sales in Germany. In addition, The Hartford will make changes in its U.S. variable annuity products.
The company's net loss of $1.2 billion or $3.77 a share for the first quarter reflected a $1.5 billion charge. It stemmed from revised estimates of future gross profits in the life operations. The operating loss of $1.175 billion or $3.66 a share, which excludes investment gains and losses the company has taken, was larger than the $3.05 a share loss predicted in a survey of analysts by Thomson Reuters.
The Hartford lowered its forecast for operating earnings to between 5 cents and 45 cents a share for 2009, including the $1.5 billion charge. The charge wasn't included in previous guidance of $5.80 and $6.20 a share.
Ayer said the property-casualty business delivered strong performance again in the first quarter, though net income from ongoing operations fell to $111 million from $312 million a year earlier. He cited larger investment losses and lower investment income, which includes dividends and interest on investments the company continued to hold.
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