NU Online News Service, May 12, 2003, 12:58 p.m. EDT – Hartford Financial Services Group Inc., Hartford, says it will eliminate the jobs of 850 workers and take other steps to cut costs and raise capital.
Hartford executives discussed the changes after warning that the company will report a $1.4 billion net loss for the first quarter on $4.3 billion revenue, compared with $292 million in net income on $4 billion in revenue for the first quarter of 2002.
The full earnings report is scheduled to appear Tuesday.
Hartford is attributing the loss to a $3.9 billion increase in reserves for asbestos claims at its property-casualty unit.
Operating income, which includes $34 million in realized investment losses but excludes the asbestos charge, increased to $340 million, from $293 million.
Hartford says the job cuts it is planning will “come primarily from the property-casualty businesses” and, together with the elimination of vacant positions, reduce its staff size about 5%. The company is also planning to sell its property-casualty reinsurance unit and issue more than $1.8 billion stock, notes and other securities.
In a related announcement, the New York office of Moody’s Investors Service says it is affirming the insurance financial strength ratings of Hartford’s life and property-casualty insurance subsidiaries.
But Moody’s says it may downgrade the debt ratings of the parent company and Hartford Life Inc., Hartford’s main life insurance umbrella company.
“Hartford Life has a leading market position in the individual variable annuity business as well as top-tier positions in the group life and disability markets,” Moody’s says in a statement about the ratings review. “In addition, [Hartford Life] has good asset quality and ample liquidity, and is a well-managed company whose strong brand is enhanced by its solid record in customer service.”
But Hartford’s life insurance business faces pressure from the weak stock market and high bond default rates, Moody’s says.
The firm has assigned an A2 debt rating to the senior unsecured debt of Hartford Financial and Hartford Life Inc.
Moody’s has assigned an Aa3 insurance financial strength rating to Hartford Life & Accident Insurance Company, Hartford Life Insurance Company and Hartford Life & Annuity Insurance Company.
Moody’s says it has been setting the debt rating of Hartford two notches lower than the insurance financial strength rating of its insurance operating companies. Moody’s notes that it usually puts three notches between a parent company’s debt rating and the insurance rating of the main insurance subsidiaries, and that it now feels “conventional notching” is appropriate for Hartford.