The Hartford to Restructure for Growth, Target Small to Medium Accounts
By Joe Rauch
April 2, 2010
Hartford Financial Services Group Inc. will restructure itself under a plan to reignite growth by courting small- and medium-sized businesses as clients and reigning in risk.
The announcement of the plan comes a day after the insurer, the 10th-oldest company in the United States, repaid $3.4 billion of U.S. government bailout aid that was made necessary by massive losses during the financial crisis.
Chief Executive Liam McGee, speaking at Hartford's New York City investors meeting on Thursday, unveiled a strategy that included above-market growth goals and realigning the company into three main business units.
"We're too complex a firm right now,'' McGee said, during a question and answer session with investors.
He said Hartford will focus on limiting company-wide risk, and avoid concentrating too heavily in the sales of certain products -- like variable annuities.
Hartford reported in fourth quarter 2009 its first quarterly profit in nearly two years, after suffering massive losses on stock-market related annuities and investments throughout the financial crisis. The company reports first quarter earnings on April 29.
The new plan focuses on small and mid-size business customers for insurance, retirement plan and group benefit sales.
Hartford also plans to grow its wealth management business by courting business owners' as clients, and aims to sell up to $5 billion in annuities annually by 2012.
Finally, the company is ending mass marketing of personal insurance lines, and will court customers above 40 years old, primarily through affinity groups like AARP.
McGee said Hartford is targeting high single-digit core earnings growth between now and 2012, along with an 11 percent return on shareholder equity by 2012.
As part of the restructuring, the company will split its operations into three major business units -- consumer markets, commercial markets, and wealth management -- and focus on a narrower set of insurance, wealth and annuity services and clients.
The change was first announced to employees on Tuesday, and the restructuring is expected to be completed by summer, McGee said in an interview with Reuters.
"It was clear the company had significant capabilities, but it was unduly difficult to get things done,'' said McGee.
The commercial markets unit will oversee all insurance catering to business and corporate customers, as well as Hartford's legacy property and casualty holdings. It will be run by former property and casualty chief Juan Andrade.
The new wealth management division will oversee the annuities, individual life insurance and traditional wealth advisory services, and will be managed by John Walters. Walters formerly oversaw the company's life division.
The consumer markets division will manage the company's AARP relationship, other affinity programs and general development.
McGee said the search is continuing internally and externally for an executive to run consumer markets, and he expected to name someone by the summer.
Although the company is making major changes in its operations, it has no immediate plans to divest pieces of the company, McGee said.
"We like the businesses we're in,'' he said.
During the presentation, company executives said the higher-than-expected earnings would come via a mix of cost-savings initiatives and pricing its products to produce a 13 percent to 15 percent return on equity.
Hartford Chief Financial Officer Chris Swift said the company was revising its 2010 earnings forecast of $3.70 to $4.00 per share, announced in February, to $2.60 to $2.90 per share, reflecting the repayment of the U.S. government's bailout aid.
But longer term, Hartford executives said they are interested in expanding the insurance and other units to cover emerging industries, like renewable energy.
"That's going to evolve,'' McGee said.
Hartford shares closed up 1.6 percent at $28.88. Company shares have rebounded strongly from a 52-week low of $6.52 a year ago and have gained 24 percent this year.
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