The Hartford, Connectciut insurer's stock declined $9.01 a share, or 18%, to $40.99 yesterday, even as a number of other major insurers closed up along with broader indexes, which rebounded from the prior day's sharp declines. The drop came a day after Fitch Ratings shifted the outlook on the firm's ratings to negative from stable. Moody's Investors Service took a similar action last week on some Hartford ratings.
In a statement after the Moody's announcement, Hartford Chief Executive Ramani Ayer said the firm was well-capitalized. "Over the last several years, we have intentionally strengthened our capital position to enable us to have the necessary financial flexibility to weather unforeseen storms," he said.
The rating-firm moves come against a backdrop of broader concern about life insurers and the risks they face from exposure to the troubled debt and stock markets.
This week, Fitch Ratings lowered its outlook for the whole U.S. life-insurance sector to negative from stable. Hartford sells both life insurance and property-casualty insurance.
Hartford reported a 13% drop in net income in the second quarter, to $543 million, compared with the same period a year prior. When the company reported those results, in late July, Mr. Ayer said Hartford had at least $1.5 billion more in capital on hand than it needed.
The cushion has likely been eroded, but a move to raise capital by issuing new shares is "not necessarily imminent," Andrew Kligerman, an analyst at UBS, said in a research note after Fitch acted. But, he added in an interview, "You certainly can't rule it out."
Fitch said that it believes that Hartford's "near-term capital quality will remain at adequate levels for the company's ratings." Brian Schneider, a Fitch analyst, said in an interview, "There's not any liquidity pressure at the company."