Hartford Financial Services Group Inc. shares soared as much as 52 percent Friday after the company boosted its 2008 profit forecast and said it had more than enough capital to withstand significant further deterioration in equity markets.
The outlook provided reassurance to investors who had driven Hartford’s shares down 92 percent this year on worries the property and casualty insurer could run short of capital needed to back policies.
The shares were up $2.62 to $9.83 in morning trading on the New York Stock Exchange after earlier rising to $10.95.
“We are well capitalized to withstand further downdrafts in equity markets,” Chief Executive Ramani Ayer said at an investor presentation. “We expect investments will recover even in a severe recession scenario. And we are taking steps to de-risk our annuities business.”
The Hartford, Connecticut-based insurer now expects full-year profit per share, excluding some investments, of $4.70 to $4.90, up from an Oct. 29 forecast of $4.30 to $4.50.
Analysts on average expected $4.38 per share, according to Reuters Estimates.
Hartford said the higher outlook reflected an increase of 62 cents per share from the release of $300 million of reserves for property and casualty claims.
Offsetting this were lower-than-expected investment results as equity markets tumble. The outlook assumes the Standard & Poor’s 500 index ends the year at 860, about 2 percent above Thursday’s close. Ayer said Hartford could withstand capital erosion even if the S&P 500 fell below 700.
Hartford has been rebuilding capital after poor investment results led to a $2.63 billion third-quarter loss.
In October the company raised $2.5 billion from German insurer Allianz SE.
Last month Hartford agreed to buy a small Florida thrift and said it would apply to become a savings and loan holding company, making it eligible to receive up to $3.4 billion under the government’s $700 billion financial rescue plan.
Hartford characterized its capital level as strong, warranting at least a “double-A” credit rating, and said it held more than $12 billion of cash, short-term investments and U.S. Treasuries as of Nov. 30.
(Reporting by Jonathan Stempel and Lilla Zuill; Editing by Lisa Von Ahn)
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