Hartford Financial Fails to Meet Even Low Expectations

One of the largest insurers, Hartford Financial, reported first quarter losses this evening that were well below analysts' estimates. But you can't say they didn't warn you.

Those who followed the Hartford, Connecticut-based insurer's steady drumbeat of bad news braced for what they thought was the worst: a loss of $2.80 a share in "core" or operating earnings, which is how most insurers are measured. What they got instead was a loss of $3.66 a share. Book value per share, which Chief Executive Ramani Ayer always touted as a measure of the company's performance, fell by more than half.
Hartford will suspend writing new business in Japan, which was once its crown jewel, and where it still has more than half a million policies and $30 billion in assets. And the same goes for its United Kingdom operation.

While MetLife, which also reported earnings today, saw U.S. annuity deposits grow to $7.4 billion, Hartford Financial will be making "near-term changes" to its U.S. variable annuity business, including price increases and eliminating terms that don't include investment restrictions.

Variable annuities are products based on the stock market and it appears that Hartford Financial oversold its products. Ayer said his company is "planning to launch a new variable annuity product in the third quarter focused on simplicity, competitive cost and a lower risk profile." That sounds like a big mea culpa.

In an effort to paint a bright face on a unit that Hartford Financial is apparently selling, Ayer said the company's property and casualty business had "delivered another quarter of very good performance," with insurance premiums down only 5 percent from a year ago at $2.5 billion. In contrast, property insurer Travelers, which also reported earnings today, saw its premiums rise a fraction to more than $5.2 billion.

Ayer should have his hands full on the conference call tomorrow morning. First there are the meager earnings and then the pesky questions about which units of the company he's selling: life, or property casualty, or both. And then there's his plan to grab some of the federal government's TARP funds.

If Ayer thinks the taxpayers are going to bankroll his mistakes, he needs to take a good hard look at Chrysler.