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Hartford Financial: Are Chances for a Sale Diminishing?

The situation didn't look good for insurer Hartford Financial last evening after releasing first quarter losses that exceeded analysts' estimates. Judging by what was said at two conference calls this morning it fared no better, and its shares were off more than 8 percent in midday trading.

Hartford Financial CEO Ramani Ayer today told analysts and investors he wouldn't comment on media reports that pieces of the insurer were up for sale. He then went on to say that "we are considering a range of potential actions" but "we may continue with our diversified business model."

Reading the verbal nuances common to CEOs, it appears that Ayer stuck his toe in the mergers and acquisitions water and found it frigid. Media reports, including BNET Financial, have made it clear that first he tried to sell parts of Hartford Financial's flagging life insurance operations, and then its more sound property and casualty unit. Each of these divisions represents about half the company.

In answer to an analyst's question about taxes if he should sell the property and casualty unit, Ayer was quick to give a $7 billion figure, indicating that it was definitely on his mind.

But the Hartford, Connecticut-based insurer finds itself in the unenviable position of trying to compete against the guy next door, American International Group, who's running a fire sale. With AIG's assets going for such low prices, why even look at Hartford Financial, particularly when money is tight?
Over at Travelers, the nation's fourth largest property and casualty insurer by revenue and profits (Hartford is number 11), the question was also addressed, but again indirectly. Travelers had been specifically named by Bloomberg News as a possible buyer of Hartford Financial's P&C unit.

Travelers CEO Jay Fishman gave the usual "no comment on specific situations" and then said he would only buy a company or unit that could achieve a "mid-teens return on equity over time."

It's no surprise that a 15 percent return on equity is considered good for an insurer, but Fishman is setting the bar pretty high for a Hartford Financial acquisition as operating earnings at its property and casualty unit fell 25 percent in the first quarter. However, Fishman did repeat that he meant "over time," but neglected to say how long that would be.

Perhaps Ramani Ayer, who's a longtime P&C guy, can perk up Hartford Financial's ailing home and business insurance unit to this level, where it was a few years ago. But if he does, then why bother to sell it?

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