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Hartford Financial says its liquidity is strong
Wednesday October 1, 3:01 pm ET
Hartford Financial says despite stock movement its liquidity is strong


HARTFORD, Conn. (AP) -- The Hartford Financial Services Group Inc., a property and casualty insurer, said Wednesday that despite a drop in its stock price the company has strong liquidity.
Since the beginning of the week, the stock has fallen 28 percent. It fell another $3.71, or 9 percent, to $37.28 in afternoon trading on Wednesday.

Meanwhile, the entire market has been volatile, as the Dow Jones industrial average fell 777 on Monday and then climbed nearly 500 points on Tuesday, amid turmoil in the financial sector and a government bailout plan that was voted down.

"We are disappointed with our recent stock performance but recognize we are living through a period of unprecedented market conditions," the company said in a statement. "The Hartford's core operating businesses are performing well and our liquidity remains strong."

The company added it is confident in its ability to meet its commitments to customers.

Hartford Financial Slammed On Credit Worries (HIG)
October 02, 2008 | By Eric FoxHartford Financial Services (NYSE:HIG), and the rest of the insurance sector, is tumbling after Fitch Ratings lowered its outlook on the company, stirring fears among investors regarding exposure to bad credits in insurance companies' portfolios.

Fitch lowered the outlook from negative to stable, citing an “extraordinarily challenging credit market environment” and Hartford’s “material exposure to troubled credits” in its portfolio. The company was concerned enough to issue a statement defending its liquidity and capital position: “The Hartford’s core operating businesses are performing well and our liquidity remains strong.”

An Inside Look
A look at Hartford's investment portfolio will tell an investor what the insurer owns that has spooked the market. The Fitch news release specifically mentioned “subprime residential mortgage-backed securities (RMBS) and commercial real estate CDOs,” so we will examine those in particular. All the data are as of June 30. The company has two investment portfolios - one for its life insurance business and one for its property and casualty business.

The life portfolio has $100 billion in total assets, while the property and casualty portfolio has $29 billion. The fixed-income portion of both portfolios totals $79 billion and is 25% invested in AAA bonds, down from 35% on December 31, 2007. Only 5.1% are non-investment grade.

Hartford reports that its exposure to subprime RMBS was $2.04 billion. The company’s exposure to regular commercial mortgage-backed securities (CMBS) is $10.9 billion, and it holds commercial real estate CDOs worth $1.3 billion. The company does note that it maintains credit protection on both the subprime RMBS and commercial real estate CDO portfolios that may mitigate further losses. (For more on these securities, read Behind The Scenes Of Your Mortgage.)

Total stockholders' equity is $18.8 billion, and the total “capital cushion” is $1.5 billion.

Equity Losses
Hartford has also reported exposure in its portfolio to equity in companies that have recently performed poorly. In September, the company said it had $252 million in exposure to Lehman Brothers (OTC:LEHMQ) through various securities and $182 million to American International Group (NYSE:AIG). Exposure to Washington Mutual (NYSE:WM) was $156 million.

The entire insurance industry fell in sympathy with Hartford. The KBW Insurance ETF (AMEX:KIE), which contains a cross section of companies in the insurance sector, was down, hitting the lows it reached in July. Phoenix Companies (NYSE:PNX) and Greenlight Capital Re (Nasdaq:GLRE) were particularly hard hit, falling nearly 25%.