NEW YORK (Reuters) - Hartford Financial Services Group Inc (HIG.N: Quote, Profile, Research) said on Monday that net income plunged more than 83 percent in the first quarter, in large part from losses on investments, including credit derivatives.

The insurer also slashed its outlook for operating earnings, largely because alternative investments, such as hedge funds, are expected to perform below earlier expectations, Chief Financial Officer David Johnson said in an interview.

Net earnings at Hartford, one of the largest U.S. life and property insurers, tumbled to $145 million, or 46 cents a share, from $876 million, or $2.71 a share, in the prior-year quarter, as the company recorded $647 million in net realized capital losses.

Operating earnings, which analysts use to measure performance, fell 6 percent to $792 million, or $2.51 a share, from $843 million, or $2.61 a share, in the year-ago period.

Analysts, on average, expected the life and property casualty insurer to earn $2.46 a share on that basis, according to Reuters Estimates.

The company forecast earnings on an operating basis of between $9.20 and $9.50 a share in 2008, cut from a prior range of $9.80 to $10.20.

Johnson said that about one-third of the capital losses, or $220 million, were related to the adoption of a new accounting method, while $191 million stemmed from the write-down of some investments to market value. About $111 million came from losses on a credit derivatives portfolio.

Credit derivatives are assets like forward contracts, swaps, and options.

"Nobody likes realized losses, but the vast majority of these were in line with expectations," Johnson added.