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Insurer Hartford Posts Loss on Stock Slump, Claims

Wednesday, 02 Nov 2011 05:29 PM

Hartford Financial Services Group Inc., the life and property-casualty insurer, said costs tied to slumping equity markets and claims from Hurricane Irene wiped out profit in the third quarter.

The net loss was 2 cents a share, compared with net income of $666 million, or $1.34, a year earlier, the Hartford, Connecticut-based company said Wednesday in a statement. Excluding some investment results, profit was 5 cents a share, missing the 23-cent average estimate of 17 analysts surveyed by Bloomberg.

Chief Executive Officer Liam McGee, 57, has shifted asset allocation and product offerings as natural disasters, near-record-low interest rates and market declines pressure results. The insurer returned to profit and repaid a $3.4 billion government bailout last year after losses in 2008 and 2009. To protect against charges from equity market slumps, Hartford stopped offering new variable annuities in Japan in 2009 while retaining liabilities from the retirement products sold earlier.

“They’re not writing new policies for a lot of the things that got them into the most trouble,” Drew Woodbury, an analyst at Morningstar Inc., said in a telephone interview before results were announced. “It could take a very long time for those to work their way off the books,” he said of products like variable annuities.

Hartford fell 5.2 percent to $18 in extended trading at 4:44 p.m. in New York. The insurer had slumped 28 percent this year compared with the 15 percent drop in the 24-company KBW Insurance Index before the announcement.

Hartford’s $516 million in accounting costs reflected a decline in equities that back retirement products the firm sold in previous quarters. The Standard & Poor’s 500 Index fell 14 percent in the period.

Claims From Irene

Catastrophes cost the insurer $134 million after tax in the period, including losses from Irene, the first hurricane to strike the U.S. since 2008. The storm struck North Carolina on Aug. 27 then headed north along the East Coast, causing $3 billion to $6 billion in insured losses for the industry, according to risk-modeling firm AIR Worldwide.

Travelers Cos., the only insurer in the Dow Jones Industrial Average, said it had $253 million in Irene-related after-tax costs for the quarter. Chubb Corp. said the storm caused $335 million in pretax losses.

Hartford’s book value, a measure of assets minus liabilities, rose to $46.72 a share from $43.11 at the end of June.

McGee is boosting a bet on hedge funds and private equity while trimming holdings of fixed-income securities. The Federal Reserve has kept benchmark interest rates in a target range of zero to 0.25 percent since 2008 and has said it may keep the rate near zero through at least mid-2013.

Hartford sold stock and debt last year to repay the bailout. McGee’s predecessor as CEO, Ramani Ayer, secured the government-aid package that ranked Hartford second to American International Group Inc. among bailed-out U.S. insurers.

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