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Hartford Financial Services Group said on Thursday that CEO and chairman Ramani Ayer, under pressure from shareholders as the 199-year-old insurer struggles with record losses, would retire by the end of the year.
The Hartford, Connecticut-based life and property insurer, set to receive up to $3.4 billion in taxpayer funds, is looking outside for a successor to 62-year-old Ayer, the company said.
The search for Ayer’s successor could be complicated by the insurer’s plans to take federal funding, given restrictions on pay and spending tied to taking taxpayer aid.
Hartford is in the final stages of meeting requirements for the taxpayer funds, and is expected to receive the injection as early as mid-June.
It applied for government help late last year after large losses on investments and sales of variable annuities, a popular retirement product, left it scrambling to shore up capital.
Ayer, in an interview with Reuters, said his decision to retire had nothing to do with Hartford’s recent troubles.
“It is quite voluntary. I am very enthusiastic, and now ready to hand the reins over as he or she takes Hartford into the third century.”
Shareholders have questioned Ayer’s leadership after Hartford reported billions of dollars in losses over the past three quarters, leading the company to cut major international operations and slash its dividend 84 percent.
At Hartford’s annual meeting on May 27 a man who identified himself as a former employee asked: “When may we expect your resignation?” He added that the board should force Ayer to stand down.
Ayer on Thursday said he had been thinking about retirement for a while, and now was a good time as Hartford was on a “sure footing.”
He did not rule out stepping down earlier than planned if the search for his successor is quicker than anticipated.
The board is seeking a successor with “strong leadership qualities” to take both the CEO and chairman roles, he added.
Ayer described 2008 as a “turbulent year, no doubt, but we have put the company on the right path.”
He said employees are upbeat, describing morale as “very high … People love the company every bit as much as I do. I mean that sincerely.”
Hartford stock, which fell as low as $3.33 in March, closed up 5 cents at $14.93 in afternoon trade — about 80 percent below its 52-week high of $73.89 set last June.
C-SUITE SHUFFLE
“We view a change in leadership as a positive, believing a new CEO could help restore credibility of management,” said Standard & Poor’s stock analyst Bret Howlett, in an investor note.
“We believe the company remains more vulnerable to the deteriorating economy than peers, but think it will benefit from (federal) funds,” added Howlett, who has a “hold” rating on Hartford shares.
Ayer’s retirement is the latest in a string of senior management changes at Hartford. David Johnson, who had been the company’s chief financial officer, resigned last year. And chief operating officer Thomas Marra, seen by many as a possible successor to Ayer, announced in February that he would step down, and also quit the board of directors immediately.
Ayer received $4.5 million in compensation for 2008, even as Hartford reported a net loss of $2.75 billion for the year.
Under Ayer, the No. 4 U.S. insurer bought back $1 billion in stock a year ago, but turned four months later to German insurer Allianz for a $2.5 billion investment. Weeks later, Hartford reported a record $2.6 billion third-quarter loss.
Ayer, who became CEO in 1997, joined the company in 1973, after receiving a PhD from Drexel University, and undergraduate studies at the Indian Institute of Technology in Bombay.
Ayer said he plans to remain in the Hartford area after retirement, and “be engaged in the community — not the world of insurance. I have not planned it all through.”
(Editing by Lisa Von Ahn, Matthew Lewis and Phil Berlowitz)