Ramani Ayer, working the first weekend of October on a deal to buttress his troubled insurance company, was getting a ride home with weary colleagues after midnight when a regal stag like the icon of his company The Hartford darted onto the bucolic Simsbury road.
The company's controller was driving and couldn't avoid clipping the side of the stag, majestic with its full rack of antlers. But the animal didn't stumble, and bounded back into the woods. Ayer, The Hartford's chairman and CEO, believes the stag was only nicked, and survived.
No one knows for sure what became of the wounded stag, and some investors think the company may not be out of the woods yet either. Ayer, though, embraces a more positive metaphor as he recalls that unsettling October night.
"Our thought was, 'My God, this is quite an experience here,'" Ayer said in an interview last week. "We have saved The Hartford even though The Hartford stag just got bruised. That to me is a great symbol of both the challenge we had encountered and the recovery that was about to ensue from all of this."
Ayer, who announced June 4 he'll retire from The Hartford by the end of the year after 36 years, is still working to heal the company and polish some of the recent tarnish off the legacy he'll leave.
Much of the respected CEO's 12-year reign was marked by sales growth, expanding businesses, ever-growing profits and long periods in which the stock price rose. More recently, Ayer has provoked the ire of shareholders, who've seen shares of The Hartford Financial Services Group plummet 85 percent since the end of 2007.
The plunge reflects concerns about capital after the company's crushing investment losses, trouble in its variable annuity business and downgrades of its financial health ratings. In all, the company posted net losses of $2.7 billion last year and $1.5 billion in this year's first quarter.
Shareholders want Ayer held accountable. Some observers have anonymously posted bitter messages online calling for his firing.
Ayer, 62, accepts responsibility for the company's tribulations but not all of the blame. The depth of the markets' collapse and economy's free-fall couldn't have been foreseen, he says.
"The buck stops here," Ayer said, no pun on the company logo intended. "That's a hackneyed phrase, but at the same time, I feel as CEO, you're accountable for the organization and its performance."
'We Fight, We Win'
Ayer takes The Hartford's troubles very personally, too, not wanting to see the company falter on his watch after it managed to survive the great 1835 New York fire, 1871 Chicago conflagration, 1906 San Francisco earthquake and other disasters. He calls 2008 the year of the "financial earthquake."
"I feel this institution and its care was handed over to me by my predecessors, and I feel very strongly that my job was to make it better and hand it over to my successors," said Ayer, whose hair reveals a little more gray these days. "Obviously we encountered one of the worst recessions in your lifetime and mine."
As a result, "the company certainly went through a severe storm, but we have recovered, and we're on our way to actually build a third century of great performance and great success," Ayer said. "It's part of our genetic code: We fight, we win."
However, The Hartford, once known as one of the most conservative investors among life insurers, has suffered heavy investment losses in the past year as the stock market sank and credit markets crumbled.
Ayer acknowledges the company had a heavier concentration of investments in failed financial service companies such as Lehman Brothers, and giant mortgage financiers Fannie Mae and Freddie Mac, than some competitors did.
The Hartford also made substantial investments in commercial mortgage backed securities a kind of bond backed by mortgages on commercial real estate and their value fell, which ate into the company's capital strength. Some other life insurers focused more on originating commercial mortgages, which, unlike the securities, aren't required to be carried on balance sheets at market value.
Ayer says The Hartford bet on the mortgage securities because they were viewed as easy to manage and highly liquid easily sold to raise cash for unexpectedly high claims. "Today in hindsight we can see that was not the case," he said. "You learn from it and you move on and you build from there."
The Hartford moved quickly to raise $2.5 billion to bolster its strength last October by selling rights to buy a stake in the company to German insurer Allianz the deal Ayer was finalizing when the real-life stag crossed his path. As markets plunged, the money wasn't enough to save the local company from ratings downgrades.
The Hartford has also slashed its dividend, continued to lay off employees, considered breaking up the company by selling the life or property-casualty insurance operations, and begun to reshape the company.
It is curtailing international operations to focus on U.S. sales, selling some small units, and shrinking its major U.S. variable annuity business.
Though some insurers rejected federal bailouts, The Hartford is finalizing details to get $3.4 billion of government "TARP" money "to remove any doubt in anybody's mind in terms of our capital flexibility to be able to weather a serious further downturn in the economy," Ayer said.
With TARP funds, the company shouldn't have to revisit the dramatic options it had considered, he said, declining to confirm widespread reports that the options included selling major parts of The Hartford.
TARP money, though, comes with restrictions on executive compensation a potential impediment to keeping or attracting new talent at a company that has lost six top executives in two years including Ayer's upcoming exit. That worries some analysts, including Citigroup's Joshua Shanker, who cited a "meaningful management vacuum" at The Hartford.
But Ayer notes that two of its executives left to serve the country Neal Wolin is now deputy Treasury secretary, and David M. Johnson is chief financial officer of Fannie Mae. The company, Ayer said, still "has good people at the helm of a lot of these major operations at The Hartford."
On a more local level, worries about the company continue because it has laid off at least 325 employees since late last year and will make more cuts in the Hartford region, where the company has roughly 12,300 employees.
Ayer says he's "passionate" about the Hartford area he hopes to do something locally in the field of education when he retires and says the company is an "institution that belongs to the larger community." Yet he also owes a duty to shareholders, agents and customers.
"My goal is to create a successful, viable, thriving" company, he said. "That automatically as a corollary creates opportunities for people both in Connecticut and elsewhere."
Ayer, known for his resolute optimism at least publicly admits to months of worry about finding the right cures for the company's ills.
But did he ever fear The Hartford might fail? "Never," he responded quickly and firmly. "I had full confidence. Never did I doubt The Hartford would emerge out of this."
Reprinted with permission of the Hartford Courant.
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