Hartford, Conn. — Reports surfaced that The Hartford's stock crumbled Thursday, fueling speculation that the insurer might have to start selling businesses to raise money, or even give up its independence, according to The Hartford Courant.

According to the news outlet, the stock price nose-dived $10.24, or a historic 52%, closing at $9.62 a share, the day after The Hartford Financial Services Group confirmed a $2.6 billion net loss for the third quarter, driven by investment troubles.

The Hartford Financial Services Group Inc. reacted in a recent press release, stating that its capital margin—the capital in excess of modeled rating agency requirements to maintain AA level ratings—would be approximately $2 billion at year end, assuming a year-end S&P 500 level of 900. This compares to an estimate of $3.5 billion, which was disclosed by the company on Oct. 6, 2008, following the announcement of the Allianz transaction. This prior estimate assumed a year-end S&P 500 market level at a Sept. 30, 2008, level, which was 1,165.

The company also outlined additional details on the company’s estimated year-end risk-based capital (RBC) ratio for Hartford Life and Accident Insurance Company (HLA) at various S&P 500 levels. An RBC ratio of 325% or higher has historically been associated by various rating agencies with AA level ratings.

“The Hartford is financially strong and well capitalized,” says Ramani Ayer, The Hartford’s chairman and CEO. “The company’s RBC ratio, including a number of provisions, is estimated to be above 400% at year-end S&P 500 levels of 900. Our capital position is more than sufficient for current market conditions and in the event markets deteriorate further.”

“In addition, should market conditions become more severe, we have access to additional sources of capital without tapping public markets or other capital raising options,” Ayer says. “These sources include capital in the parent company and the property and casualty subsidiaries, a $500 million contingent capital facility and a $1.9 billion bank credit facility. The company’s property and casualty subsidiaries will continue to be capitalized at or above the levels historically associated with AA level property and casualty insurers.”

Given uncertainties regarding the application of rating agency models and the difficulties of estimating capital margin in an environment of severe capital market volatility, the company intends to present its capital position for its life operations in terms of RBC ratio.

Sources: The Hartford Courant, The Hartford Financial Services Group Inc.

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