Posted on 05 Jun 2009
Just as his company is on the verge of getting crucial new capital after the worst year in its 200-year history, Hartford Financial Services Group Inc. Chairman and Chief Executive Ramani Ayer will retire by the end of this year, leaving the rebuilding to an external successor.
In an interview Thursday, Mr. Ayer said that he expects the company will receive $3.4 billion in capital from the U.S. Treasury's Capital Purchase Program within a couple of weeks.
He firmly denied that his decision to retire was in any way demanded or even suggested by the Treasury as a condition for getting the capital.
"Don't even go there, it is nothing like that," Mr. Ayer said. After 35 years with the company, he had originally planned to leave the company at the end of 2008, but "the last part of 2008 turned out to be something different than what most of us expected," he said, and he put off retiring.
The plan to look externally for his replacement rather than promote from within is also a decision made by him and the board of directors, and Mr. Ayer said it was not causing internal strife. "They all look forward to working with the new CEO," he said. "I don't believe there is any disruption."
The past year has been disastrous for Hartford, one of the biggest variable annuity sellers. The company reported a total of nearly $4 billion in losses over the last five quarters, driven by investments in financial services providers and rising costs connected to its variable annuities as the equity markets fell.
In October, Mr. Ayer tried to rebuild the company's capital with a $2.5 billion investment by Allianz SE, a European insurer, but the market continued to fall, putting more pressure on Hartford.
Allianz operates its own annuity and personal lines insurers in the U.S., and is not lobbying for a leadership role with Hartford, Mr. Ayer said.
"Allianz is purely an investor," he said. "They are not interested in putting their people in."
Shares recently were down 60 cents, trading at $14.79. The stock is down 79% the past year as Hartford has been among the hardest-hit life insurers in the ongoing credit crisis thanks to investment losses and troubles at its annuity business.
Mr. Ayer leaves as the company is remaking its business, which will focus on individual and business insurance, group benefits and retirement products.
As part of its revamp, the company suspended some sales of annuities, which carry guaranteed minimum returns that Mr. Ayer called "too rich," during the company's first-quarter conference call. Hartford plans to start selling a revamped U.S. variable annuity in the third quarter. But because of the equity market's slump before the ongoing three-month rebound, annuity purveyors have to make up the difference if investment returns can't fulfill the required minimums.
The company suspended writing new business in Japan and the U.K. and canceled a planned expansion into Germany.
The company in April sharply cut its 2009 guidance and said it was pursuing options for its institutional markets business to preserve capital and reduce risks. It also was shopping its profitable U.S. property and casualty business, but decided last month against doing so, and is paring back abroad.
Hartford and Lincoln National Corp. are the only two life insurers that have said they are inclined to take funds from the Treasury Department's Troubled Asset Relief Program.
Fitch Ratings recently downgraded the insurer one notch to two steps above junk, citing the difficulties.