The Hartford got a welcome $987 million boost to capital Thursday as Connecticut regulators eased up on some rules, but other financial news about the company discouraged investors and drove the stock down 7.6 percent.
Connecticut Insurance Commissioner Thomas R. Sullivan, a former executive for a unit of The Hartford, granted the company's request for relief on two financial requirements. The result is an increase in capital of the life insurance operations, effective Dec. 31, 2008.
The decision "will provide The Hartford with added financial flexibility while ensuring that the company is appropriately capitalized for its customer commitments during this challenging economic period, " said Shannon Lapierre, spokeswoman for The Hartford Financial Services Group.
The capital relief comes on the heels of heavy investment losses, trouble in the variable annuity business, hundreds of job cuts and an overall $2.7 billion net loss for 2008. The company's credit and financial strength ratings have been downgraded in the past week.
In one more piece of bad news, The Hartford disclosed Thursday that because of downgraded ratings, it's no longer eligible for a federal program that buys short-term debt.
The Hartford borrowed $375 million under that program, created last year when credit markets froze up. Now the company will have to repay the debt from "existing sources of liquidity" as it matures instead of rolling it over, The Hartford said in an annual federal filing.
The Hartford's stock fell $1.04 to close at $12.54 a share Thursday.
Two consumer advocates have questioned whether Sullivan should have recused himself from considering the company's capital relief request. J. Robert Hunter, director of insurance for the Consumer Federation of America, and Birny Birnbaum, executive director of the Center for Economic Justice, raised the issue and others in e-mails to Sullivan this week.
Sullivan said Thursday it has been nearly two years since he left The Hartford and that he has no financial interest in the company, having divested stock and decided to forgo deferred compensation. Sullivan said he consulted his general counsel, but not the state ethics commission, and believes he has no conflict.
"I fail to recognize there being a hint or scintilla of anything there," he told The Courant.
Meanwhile, company officials tried to dispel an impression some employees received from a meeting with management this week that The Hartford might reject federal bailout funds if granted because of restrictions on executive compensation.
"We will do what I believe is right for our shareholders," CEO Ramani Ayer told The Courant Thursday. "My first job is to shareholders. My second job is to my customers. My third job is to my people."
He said The Hartford, which is seeking up to $3.4 billion in federal bailout funds, views the program as "a prudent source of capital" given the bleak economic outlook.
Reprinted with permission of the Hartford Courant.
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