Hartford may need $2B to maintain ratings

The stock price of The Hartford (Conn.) Financial Services Group Inc. dipped by more than half yesterday, following the company’s release of dismal third-quarter results.
OCT 31, 2008
The stock price of The Hartford (Conn.) Financial Services Group Inc. dipped by more than half yesterday, following the company’s release of dismal third-quarter results. The company booked a $2.6 billion loss for the third quarter, or $8.74 per diluted share. Those numbers were released after the bell on Wednesday and the Hartford’s stock opened at $17.75 per share on Thursday, then plummeted to $9.62 by the close of the day. The Hartford also trimmed its 2008 earnings to a range of $4.30 and $4.50 per share, down from its July estimate of $9.20 to $9.50 per share. The bad news was exacerbated when analysts cut their ratings on the company on Thursday. “The risk of a rating agency downgrade and the inability of management to provide comfort on the level of their capital cushion make it very difficult to assess the downside or to argue that there is significant upside in the near term," Gary Ransom, an analyst with Fox-Pitt Kelton Cochran Caronia Waller of New York, said in a research note. He cut the company’s shares to “in-line” from “outperform.” Though chief executive Ramani Ayer reassured analysts on a conference call late Wednesday that The Hartford “remains well capitalized,” analysts were concerned about whether the company had sufficient capital to get by. “We’re not that far away from a scenario where Hartford could need to raise another $2 billion or more to maintain ratings,” Jay Cohen and Edward Spehar, analysts at New York-based Merrill Lynch & Co., wrote in a research note. On the conference call, Lizabeth Zlatkus, finance chief of The Hartford, said the carrier was open to receiving federal aid from the Treasury in exchange for a stake in the company as part of the capital repurchase program. “We certainly think there are favorable terms as we see it and we would look to do that,” she said. The carrier said it also expects to lay off an undisclosed number of employees and cutting other costs in the fourth quarter, so as to reduce annualized expenses by $250 million by the end of 2009.

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