While Ayer, who leaves at the end of the year, used the word "challenging" more than once to describe how the Connecticut-based property-casualty and life insurer is doing, it seems clear that the $3.4 billion the U.S. Treasury gave the company plugged a big hole.
"Uncertainty about our ratings had slowed our life business," said Ayer. Now, "the future direction of the company is clear."
Traders obviously agree: The Hartford's shares are up today to $16.61. They had been trading below $4 in March before the TARP transfusion.
Optimism is a wonderful thing, and Ayer seems genuinely excited about the rollout of his new variable annuity product later this year. Variable annuity products are based on stock market performance and Hartford was an acknowledged leader until it stumbled last year at the same time that the market lost nearly 40 percent of its value.
Hartford Chief Financial Officer Liz Zlatkus said that variable annuity-related capital has improved to the point where "we can withstand a sharp decline in the equity market."
Another bright sign: Hartford will reduce its liquidity position, that is, cash on hand for emergencies, from $16 billion to $11 billion by year end, putting $5 billion into fixed income investments. That should improve its investment income, which was pretty feeble in the second quarter.
But Hartford's troubles have precipitated employee defections, which were hinted at on the conference call. The property casualty market, while improving, faces stiff competition. Small businesses, which Hartford wants to focus on, are closing, and unemployment is still on the rise. "The economy's a headwind," admits Ayer.
There is also the unfortunate fact that borrowing money from the federal government has a price. The preferred stock that Hartford gave to the Treasury in return for the $3.4 billion will cut earnings by $170 million, according to Zlatkus.
And then there is Ayer's imminent departure. During most of his 18-year tenure he was a good leader, but he gave no hint as to his replacement. Juan Andrade was just picked to head up property-casualty and John Walters, who has run the life insurance division, hasn't covered himself with glory during the variable annuities crisis.