Posted on 19 May 2009
On Monday, the "Daily NewsFlash" reported that an internal memo to employees from CEO Ramani Ayer of Hartford Financial Services was distributed, saying that the insurer will not break itself apart. The "Hartford Courant" reported the announcement today, reinforcing the impact such news has on employees and the community in which Hartford is headquartered.
The U.S. Treasury's preliminary approval of $3.4 billion in federal bailout money Thursday night had given Hartford Financial Services Group Inc. some breathing room. But officially, at least, the company was still considering a possible breakup by selling major divisions until Ayer delivered the news.
An employee who spoke with "Courant", declining to give her name, said she could hear the collective sigh of relief coming from people at their desks.
"Somebody said, 'Oh, thank God.' Another one was like, 'This is stability,'" the employee said.
It is stability amid ongoing layoffs, but a measure of stability nonetheless. A sale of property-casualty, which had been speculated, might have meant massive job cuts among The Hartford's 12,000 employees in Greater Hartford.
"We will move forward with both property and casualty and life businesses," Ayer wrote, confirming a decision analysts had expected after the bailout money was announced. "Although this has been an incredibly challenging period in our company's history, The Hartford has demonstrated strength and resiliency in the marketplace."
Ayer also told employees Monday that the company would continue to operate wealth management and retirement businesses, including mutual funds, retirement plans and a restructured annuities business. But it will move ahead with retrenchment of its annuity business in Japan, cancel expansion plans for Germany and still consider selling one money-losing life insurance business based in Simsbury.
Hartford had said on April 30 that it would consider selling off businesses and might no longer remain a diversified insurer — with both property-casualty and life operations. Published reports said Hartford was shopping its strong property-casualty unit, which employs thousands of local people, to Travelers and other companies.
But with $3.4 billion in government aid in the pipeline, the pressure is off Hartford to sell any of its businesses, analysts said. Hartford was among several life insurers approved for the bailout under the Troubled Asset Relief Program.
We're feeling a little more comfortable," said Arun Korvi, a Web developer for the company. "I guess this means I don't have to worry about looking for another job."
For many, it is an apprehensive sigh of relief. As investment losses mounted, Hartford has reported net losses totaling $3.9 billion between the start of 2008 and March — and two words lingered at the bottom of a list of actions the company is taking to shore up its finance: "reducing expenses."
"That means layoffs," one employee said Monday night.
The Hartford eliminated 500 jobs company-wide in late 2008, including about 125 in the Hartford area. Layoffs have continued this year, although the company has not yet announced how many have happened, or will happen.
Asked whether the decision to remain whole will mean an acceleration of job reductions, company spokeswoman Shannon Lapierre said, "We haven't necessarily sized that yet."
Ayer said in the letter that the company is still "exploring options" for its Institutional Markets business, a part of the life operations that sells corporate-owned and bank-owned life insurance. This includes life insurance in which companies are a beneficiary if their employees die.
That business had a net loss of $174 million in the first three months of 2009 largely because it is closely linked to stock market performance. It was not clear late Monday how many local employees the business has.
Ayer described The Hartford's financial performance in recent months as "disappointing" in his letter, saying the company was more affected by market volatility than its peers.
The company last year received a $2.5 billion capital infusion from German insurer Allianz, which gained the right to acquire nearly 24 percent of the company, and Hartford drastically cut its shareholder dividend to preserve capital.
"While we still have much more work to do," Ayer said in the memo, "I have no doubt we have the people, the commitment and the solutions to successfully compete in the marketplace, now and in the future."