Hartford Posts Narrower Loss on Fewer Investment Declines

By Andrew Frye
Bloomberg News
November 3, 2009

Nov. 3 (Bloomberg) -- Hartford Financial Services Group Inc., the insurer that replaced its chief executive officer after a U.S. bailout, reported a narrower third-quarter loss on fewer investment declines. Shares rose in late New York trading.

The net loss was $220 million, or 79 cents a share, compared with $2.63 billion, or $8.74, in the year-earlier period, Hartford, based in the Connecticut city of the same name, said today in a statement distributed by Business Wire. Operating earnings, which exclude some investment results, were $1.56 a share, beating the $1.13 average estimate of 14 analysts surveyed by Bloomberg.

Hartford added to the $4.66 billion in losses the company accumulated in the previous year as debt holdings lost value amid rising unemployment. The insurer was caught off guard last year with bets in structured debt and financial services investments, and received $3.4 billion from the government in June to rebuild capital.

"There's billions and billions of dollars that have to be processed" as impairments by life insurers as bond holdings sour," said Randy Binner, an analyst with FBR Capital Markets, before results were released. Hartford has "an above average loss profile," compared with other carriers because of its investments in commercial mortgage-backed securities.

Hartford advanced $1.18, or 4.6 percent, to $27 at 4:39 p.m. in extended New York trading. The stock is up 57 percent on the New York Stock Exchange this year. Hartford said it expects to make 85 cents to $1.05 a share this year in core earnings, which is higher than the zero to 20 cents a share the company predicted three months ago.

Realized capital losses dropped about 60 percent to $885 million, after tax, from $2.2 billion in the same period a year ago. Impairments were $336 million on losses in structured securities. Investment income slipped 5 percent to $1 billion, Hartford said.

CEO Liam McGee, hired in September from Bank of America Corp., is seeking to reduce risk in a portfolio that produced $2 billion of impairments in the third-quarter last year.

McGee, who headed Bank of America's consumer and small- business banking, is reviewing Hartford's collection of life, retirement and property-casualty businesses, and plans to set his strategy by the start of 2010. He's facing tougher competition from MetLife Inc., the biggest U.S. life insurer, and No. 2 Prudential Financial Inc. after Hartford was downgraded three times by S&P this year.

Hartford posted a 69 percent drop in variable annuity sales in the second quarter, slipping to No. 15 in the U.S. rankings, according to trade group LIMRA International. MetLife, led by Robert Henrikson, rose to the top spot on a 27 percent increase, while Prudential was third with a 23 percent advance in the period. Bailed-out insurer American International Group Inc.'s sales fell more than half.

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