The Hartford Will Break Apart, Raising Questions About Jobs

The Hartford Financial Services Group, based in Hartford, will stop selling individual annuities next month. (FILE PHOTO)

Connecticut's largest employer in the insurance industry, The Hartford, is breaking apart.

The Asylum Hill company that dates to 1810 enjoyed relative calm from the time it was spun off by ITT Corp. in 1995 to its near collapse in 2008, a period when other multi-line insurers such as Travelers and Aetna were splitting into pieces.

The Hartford Financial Services Group said Wednesday that it will end new sales of annuities to individuals on April 27, and that it is selling its individual life-insurance business, retirement plans and its Woodbury Financial Services brokerage.

The breakup follows weeks of intense pressure from The Hartford's largest shareholder, a New York hedge fund managed by billionaire John Paulson. It is not, however, a spinoff of property-casualty operations from life insurance, as Paulson had wanted.

After the annuities runoff and sale of life and retirement units, The Hartford plans to focus on property-casualty, group benefits and mutual funds — more profitable and less volatile businesses — in hopes of unlocking share value and setting the stage for growth.

"We want to be a superior-performing company, we want to create shareholder value, and the status quo, in our view, was not going to get us there in a reasonable period of time," The Hartford's CEO, Liam E. McGee, told The Courant in an interview.

The effect on jobs in central Connecticut, where The Hartford has 10,300 of its 24,400 total employees, remains unclear. Some employees said the mood in the Simsbury office, where hundreds of people work in annuities, and at the company's main campus in Hartford, was jittery.

In New York, the proposal was met with a lukewarm response by Paulson, whose firm, Paulson & Co., owns 8.5 percent of the company.

"We support today's actions, not as a conclusion of the strategic review, but as a first step in creating a clear delineation between The Hartford's P&C and non-P&C businesses," Paulson & Co. said in a statement, adding, "While we appreciate the extensive work of The Hartford's board and management, we do not believe the positive actions announced today address the main problem with The Hartford's undervaluation."

Shares opened up sharply and later settled, closing at $22.02, up 31 cents, or 1.4 percent, on the New York Stock Exchange.

The breakup plan is the latest and most dramatic recovery step in The Hartford's 4-year odyssey, since investment losses — including mortgage-backed securities — eroded the company's strength at the start of the recession. The company has had massive executive changes, including the early retirement of Ramani Ayer, a CEO who had guided it through years of growth; a huge cash infusion by a German insurer; a $3.4 billion federal bailout; and thousands of job losses amid restructuring.

As Wall Street studied the plan, the question coursing through the city and state was about jobs at the Stag, the company's mascot and nickname. Decades after other insurers spread their workforces far and wide, The Hartford maintains an astounding 40 percent of its payroll at home, and any radical step is viewed as a threat to that situation.

McGee said he believes that the new strategy could lead to job growth.

"I think as we strengthen the company with this plan, both Connecticut and the city of Hartford remain incredibly important to our company," McGee said. "I would hope as we implement this plan, it gives us a platform to invest and create new jobs in a prosperous, growing Hartford — the company."

"We'll continue, as we have been, to be a very involved citizen, whether it be in our Asylum Hill project, whether it be in helping the demolition of the Capitol West building, and all the other things our teammates do in Connecticut and the city of Hartford," McGee said. "If anything, I view this as an opportunity to continue to invest and grow in Connecticut and in the city of Hartford."

'The Mood Is Somber'

The Hartford did not say how many employees work in the affected businesses, or how the company might disentangle parts of the insurer that will remain from those that will be sold or put into runoff.

For employees at divisions being sold, their fate depends on the strategic needs of the buyers. But the jobs in annuities — a significant segment, with $80 billion in assets in the U.S. and $30 billion in Japan — will eventually disappear. It was not clear Wednesday when and whether layoffs would occur.

"These are multiyear commitments to customers," McGee told The Courant. "We will be servicing significant blocks of annuities for many years, and our teammates who are servicing them will continue to service them. We will honor our commitments to our customers."

Despite reassurances, workers were worried about their jobs.