Ramani Ayer, who led The Hartford through years of high esteem and growth before confronting its current turmoil, said Thursday that he will retire by year-end — the sixth high-ranking executive to leave the troubled company in two years.
The board is searching for an executive from outside The Hartford Financial Services Group Inc. to replace Ayer, 62. He has been chairman and chief executive since February 1997 and has spent his entire 36-year career at The Hartford, which sells property-casualty and life insurance, annuities, and other investment and retirement products.
"I believe now the company is on a sure footing and so I thought it was the right time to begin a search for a successor," Ayer said in an interview Thursday. "The company has a clear direction."
The 199-year-old company has been wracked by massive investment losses and costs related to guarantees on variable annuities. The problems drove net losses of $1.5 billion in this year's first quarter and a $2.7 billion loss in 2008, led to multiple downgrades of the company's financial ratings and has deflated its stock price by 83 percent since the end of 2007.
Although the trampled stock price has angered many shareholders, Ayer said that there was absolutely no pressure for him to leave from The Hartford's board of directors or the U.S. Treasury. The Treasuryagreed last month to invest $3.4 billion of federal bailout money in the company, which expects to finalize the deal by mid-June.
Ayer said that at the start of 2008, he had hoped to retire by year-end, but "the markets turned so bad suddenly and things didn't work out" as planned.
The company, which has about 12,300 employees in the Hartford region, has been cutting expenses and has eliminated at least 325 local jobs since late 2008, with more cuts on the way.
The Hartford has also rethought its strategy. It's keeping its life and property-casualty operations but shrinking some businesses, growing others, retreating from overseas ventures and trying to sell some small units.
However, with the $3.4 billion in federal money from the Troubled Asset Relief Program, plus a $2.5 billion investment last fall from German insurer Allianz, The Hartford averted the need to sell off major pieces of itself to protect its financial strength.
"I think the company is in a very good place now," Ayer said Thursday when asked why he's retiring. "I think our strategy is set. Our capital position should be strong [enough] to be able to weather any further downturns in the market," he said, acknowledging that there's always uncertainty with volatile markets.
Ayer's successor was expected to be Thomas M. Marra, who was promoted to president and chief operating officer of The Hartford in 2007. But Marra, 50, had led the life operations — the most troubled side of The Hartford — and the company announced in February a "mutually agreed separation" in which he will retire July 3.
Ayer and the board had long been talking about management succession and his plans to retire, and none of the directors wanted him to leave despite the company's troubles, said Michael G. Morris, the lead independent director, in an interview.
"This was Ramani's choice and we felt duty-bound to respect it," said Morris, a former Northeast Utilities chief executive and now CEO of American Electric Power Co. Morris also praised Ayer's integrity, deep knowledge and experience.
It's an opportune time to initiate a management change "because they have turned the initial corner on this crisis," said Jeffrey Schuman, an analyst at Keefe, Bruyette & Woods. The company needs someone who can execute the new strategy over the next few years, and it would have been difficult for the board to ask Ayer to make such a lengthy commitment, Schuman said.
Ayer, born in southern India and raised in Mumbai, joined The Hartford after graduating from Drexel University in 1973. He has long been a widely respected CEO in the industry, considered extremely sharp and analytical.
His tenure as chief executive will be viewed as "mixed," Schuman said.
"He has presided over a number of notable initiatives," including building the retirement savings business and refining the property-casualty insurance strategy, but he wasn't so successful in managing the company's capital, Schuman said.
During one of the industry's last cycles, The Hartford came under pressure and "Ramani resolved to manage their balance sheet more conservatively," Schuman said. "But despite that, the company ended up under significant balance sheet pressure during this cycle."
Ayer wouldn't speculate on who his successor might be. The company has hired an executive search firm to find CEO candidates, and Morris said the successor is likely to come from the insurance or financial services industries.
Investors weren't fazed by Ayer's announcement Thursday, and The Hartford's stock closed at $14.93 a share, up 5 cents, after trading down slightly at times.
Ayer will be leaving a job that provided him with $9 million in compensation for 2008, including $5.7 million of value from exercising old stock options. His accumulated pension benefits were valued at $36.2 million as of Dec. 31. His pay package in happier times — 2007 — was nearly $23 million, including $12.75 million from exercising options.
A Simsbury resident who has no plans to move, he says he hasn't cemented any plans but "I want to be working and engaged with the community."
The CEO addressed employees in a meeting Thursday about his retirement and pledged in a memo to them that he'll keep working hard on the company's turnaround. "I am fully committed to The Hartford and doing whatever it takes to continue to lead this organization," he wrote. "I will not slow down."
Reprinted with permission of the Hartford Courant.
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