The Hartford Financial Services Group Inc. on Friday raised its profit expectations and reaffirmed the strength of its capital position, sending shares of the insurance company up by more than 100 percent.
In advance of an investor meeting in New York, Hartford Financial said it now expects a profit of $4.70 to $4.90 per share for the current full year.
That's up from the full-year profit of $4.30 to $4.50 per share that the Connecticut-based company forecast when it reported a third-quarter loss of $2.6 billion on Oct. 29.
Analysts surveyed by Thomson Reuters expect a full-year profit of $4.36 per share, on average.
Hartford Financial attributed its improved outlook to "the current market environment" as well as its expectations to release about $300 million pretax from its property and casualty insurance reserves.
Among other things, the improved outlook assumes the Standard & Poor's 500 index ends the year at 860 -- about 2 percent above Thursday's close -- and a pretax net investment loss from limited partnerships and other alternative investments of $240 million from October through December.
The raised profit forecast is still about half of the estimate that Hartford Financial issued in July, for $9.20 to $9.50 per share.
Business
The improved outlook comes at a time when the insurance sector is reeling from the ongoing credit crisis and the weakening in equity and debt markets. Insurers, especially those that provide life insurance such as Hartford Financial, face mounting losses from equity investments in particular.
In the past, insurers have been able to pile up big returns by investing cash flow from life insurance premiums in the market before they eventually have to pay out money after policyholders die or begin collecting on annuities. With stock markets tumbling, insurers have been posting huge investment losses in recent quarters that could make it difficult to cover payouts.
Ramani Ayer, Hartford Financial's chairman and chief executive, sought to reassure investors about the company's capital strength and its nearly $90 billion investment portfolio, amid concerns about the ability of insurance companies to manage risk amid volatile markets.
"The Hartford is well-capitalized and has ample liquidity," Ayer said in a statement issued before the investor meeting.
Ayer said Hartford Financial's statutory surplus exceeded $13 billion as of Sept. 30., and the company held more than $12 billion in cash, short-term investments and Treasury notes as of Nov. 30.
"Our property and casualty operations are capitalized at levels higher than those historically associated with an AA-level rated company," Ayer said.
Ayer said his company's property and casualty business "is positioned to deliver strong underwriting results in 2009."
As for the company's investments, Ayer said, "Under severe recession scenarios, we expect our portfolio to hold up quite well."
Ayer said Hartford Financial was continuing to evaluate ways to reduce risk in its variable annuities business, which offers policies that have guaranteed minimum payouts or monthly withdrawal benefits. Analysts have expressed concern that the payout obligations may exceed the amount of capital the company has on hand, due to the plunge in the overall market and Hartford Financials' own shares this year.
Shares of Hartford Financial soared $7.38, or 102 percent, to $14.59. Shares traded as high as $16.08 earlier in the session.
The stock traded around $70 a share as recently as mid-September, but had fallen to around $7 in recent days.
