The Hartford said Wednesday that it will slash expenses, cut jobs and retool prices and terms of variable annuity products after reporting a $2.63 billion quarterly net loss from investment troubles and hurricanes.
The Hartford Financial Services Group had disclosed the third-quarter net loss earlier this month when it announced a $2.5 billion capital boost from German insurer Allianz. But analysts on a conference call Wednesday peppered The Hartford's executives with questions about future capital adequacy and concerns the company may need to raise more.
Ramani Ayer, The Hartford's chairman and chief executive, said that given market volatility and economic uncertainties, he can't predict whether the company will raise more capital.
He did say, "Our resources continue to be tested by the global markets, but even at today's market levels, The Hartford remains well-capitalized."
The company, though, plans to start cutting an undisclosed number of jobs in the fourth quarter. It expects to shrink annualized expenses by $250 million by the end of 2009 by reducing staff and other costs it deems unnecessary.
"With revenues down across the company, particularly in the life businesses, we are taking a hard look at our expense base," said Tom Marra, president and chief operating officer.
The company wouldn't comment on how many layoffs there will be in Connecticut, where it has 13,000 employees.
The Hartford's third-quarter net loss of $2.63 billion compares with $851 million of net income a year ago. This year's quarter includes a $2.2 billion net realized capital loss (related to investments) compared with a $212 million capital loss a year ago. This year's quarter also was hurt by a $932 million charge related to a revision of estimates of future gross profit for certain products.
The unrealized investment loss on securities that remained in the portfolio and available for sale was $3.8 billion, a hit to the company's financial cushion.
Net investment income fell 15 percent in the third quarter from a year ago.
The company's operating loss, which excludes realized investment losses, was $422 million, or $1.40 a share, in the third quarter. Analysts had expected a $1.54 a share loss, according to the consensus estimate gathered by Thomson Reuters. The insurer had a $1.06 billion operating profit a year ago.
The Hartford expects operating earnings for the full year 2008 to be $4.30 to $4.50 a share.
Ayer said the property-casualty insurance business is doing well and that amid the ongoing price wars, "there are signs commercial pricing declines are moderating."
Reprinted with permission of the Hartford Courant.
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