The Hartford tried to calm stampeding investors and reassure employees Wednesday as its stock slid 7 percent on top of Tuesday's 18 percent plunge -- a sell-off some analysts called an overreaction.
"I don't think we should be concerned about The Hartford's viability," said Andrew Kligerman, an analyst at UBS. The question clouding the stock, he said, is whether and when the company will need to raise more capital to maintain its high ratings.
The Hartford Financial Services Group's stock dropped Tuesday after Fitch Ratings lowered its outlook on the company's ratings from stable to negative. Fitch said the company's "near-term capital quality will remain at adequate levels," but it raised the possibility that The Hartford may have to raise capital amid further deterioration in financial markets.
The Hartford, through investments and related contracts, has a larger exposure than some other insurers to the nation's credit crunch and troubled companies. Investment firm Keefe, Bruyette & Woods estimated that The Hartford will have $700 million to $800 million of realized capital losses or write-downs.
Investors are concerned that if The Hartford raises capital by selling more shares, the value of currently held shares will be diluted. "If there's even a sniff of a need to raise capital, wild thoughts enter into people's minds," Kligerman said. "The market is behaving violently, and we've seen companies evaporate that we never imagined could be in such positions."
The Hartford's stock closed Wednesday at $38.11 a share, down $2.88, or 7 percent, after trading down as much as 15 percent during the day.
Stock in other life insurers, including Prudential, MetLife and The Phoenix Cos., also sank sharply Wednesday on continued worries about their investments and how volatile securities markets could affect their businesses. Phoenix closed down $1.64, or 17.7 percent, at $7.60 a share.
Ramani Ayer, The Hartford's chairman and chief executive, said in a statement Wednesday that the company is confident in its financial strength and ability to meet commitments to customers.
"The Hartford's core operating businesses are performing well and our liquidity remains strong," Ayer said. "The Hartford has a strong history of managing through challenging times." He noted that Fitch maintained its AA (very strong) rating on the company. Moody's, which lowered its outlook last week, still rates The Hartford Aa3 (excellent).
Reprinted with permission of the Hartford Courant.
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