Waning Confidence Also Affects MetLife, Prudential
By DIANE LEVICK
October 03, 2008
It was a blood bath Thursday for shares of The Hartford, while MetLife Inc. and Prudential also plummeted on fears that the tumult in financial markets could push some insurers over the edge.
Some of the investor panic Thursday followed a comment Wednesday from Sen. Harry Reid, D-Nev., that a well-known but unnamed insurer was on the brink of bankruptcy.
A spokesman for Reid, the Senate majority leader, issued a statement Thursday backtracking on the comment, and The Hartford, Prudential and MetLife said they're not near bankruptcy.
But shares of The Hartford Financial Services Group plunged 32 percent Thursday anyway, closing down $12.20 at $25.91. The company has lost 54 percent of its value this week so far.
MetLife Inc., which has major operations in Bloomfield, fell $7.19, or 15 percent, Thursday to close at $40.96 a share. And Prudential Financial Inc., which bases its retirement business in Hartford, dropped $7.15, or 11 percent, to finish at $57.65 a share.
Reid, pushing passage of the $700 billion financial system rescue plan, had told reporters, "One of the individuals in the caucus today talked about a major insurance company ... with a name that everyone knows, that's on the verge of going bankrupt. That's what this is all about."
Reid spokesman Jim Manley said Thursday that the senator "is not personally aware of any particular company being on the verge of bankruptcy. He has no special knowledge about nor has he talked to any insurance company officials. Rather, his comments were meant to refer to the conditions in the financial sector generally."
Investors are worried because insurers have seen their investments drop in value. They've disclosed exposure to troubled companies such as Lehman Brothers, Washington Mutual and American International Group, which was bailed out by the federal government.
Thursday's stock plunges also reflect another sign of waning confidence: The cost of five-year credit default swaps, which protect against bond default, has risen to record levels for some companies. Swap traders were demanding upfront payments for swaps involving debt of The Hartford, Prudential and MetLife, Bloomberg News reported.
The Hartford has already issued new debt to pay off all of its debt that matures through June 2010, company spokeswoman Shannon Lapierre said. That's a good thing because if the company had to sell new debt now, it would have to pay a higher rate for the borrowing.
The Hartford reiterated confidence in its financial strength and liquidity Thursday. MetLife said it is "financially sound." And Prudential spokesman Bob DeFillippo said, "We are not in danger of going bankrupt."
"The insurance sector overall seems to have been affected by some inappropriate remarks made in Washington Wednesday," DeFillippo said. "There is no other specific company reason or event to explain the recent activity in the market."
Reprinted with permission of the Hartford Courant.
To view other stories on this topic, search the Hartford Courant Archives at