Hartford 1st-quarter profit tumbles, cuts outlook

By Lilla Zuill

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.

On an operating basis, the insurer beat Wall Street expectations, but slashed its outlook for full-year 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. Operating earnings exclude net realized capital gains and losses.

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.

Analysts, on average, expected Hartford to earn $9.90 a share in 2008 operating earnings, according to Reuters Estimates.

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.