High-yield/macroeconomics (fka YIELD)

[DewDiligence]

HIG Cuts Dividend 84%

[The stock has been a rollercoaster ride: it fell more than 90% from Apr 2008 to Nov 2008, then tripled from the Nov 2008 low to yesterday, and then fell sharply in yesterday’s AH session after earnings were released. A bullish article on HIG appeared in last week’s Barron’s (#msg-35245764).]

http://online.wsj.com/article/SB123387444686354267.html

›FEBRUARY 6, 2009
By KATHY SHWIFF

Hartford Financial Services Group Inc. said it intends to cut its quarterly dividend 84% to 5 cents as it swung to a fourth-quarter loss on investment losses.

Shares fell 13% to $13.14 in after-hours trading as the results fell far short of Wall Street's expectations.

"This was clearly the most challenging year in our company's nearly 200-year history," said Chief Executive Ramani Ayer.

He said the company plans to make capital preservation and risk mitigation priorities this year by de-risking the variable annuity product portfolio and cutting the dividend, which is expected to save about $350 million a year.

At the end of 2008, Hartford's life-insurance unit had a preliminary risk-based capital ratio of 385% and the property-and-casualty units were capitalized at levels consistent with AA ratings, the company said.

Hartford, along with other insurance companies, has faced continuing concerns about how its risk-adjusted capital cushion is holding up amid a falling equity market. Last month, it was granted a thrift charter, which would make it eligible for federal funds under the Troubled Asset Relief Program.

The insurance and financial-services company reported a net loss of $806 million, or $2.71 a share, compared with year-earlier net income of $595 million, or $1.88 a share.

The latest results included a $597 million write-down of goodwill in the corporate and annuity segments.

Hartford had a core loss, which excludes net realized capital gains and losses, of 72 cents a share compared with core earnings of $2.66 a year earlier. Analysts estimated per-share core earnings of $1.30, according to a poll by Thomson Reuters.

The net realized capital loss was $610 million, more than double the net realized capital loss a year earlier.

Assets under management fell 19% to $346.9 billion.

Profit fell 8% in the property-and-casualty segment on a decline in investment performance. Total written premiums for the property-and-casualty insurance business totaled $2.5 billion, down 2%, while the combined ratio, the percentage of each dollar the company collects in premiums against what it pays out on losses and expenses, excluding catastrophes, slid to 78% from 88.4%.

In October, Hartford closed on a $2.5 billion investment by German insurer Allianz SE, which gives Allianz a 23.7% stake in Hartford.

Looking ahead, Hartford expects 2009 core earnings of $5.80 to $6.20 a share. Analysts are looking for $6.08 a share.‹