Finance and Economic

Shares of Hartford Financial Services Group Inc. plummeted more than 50% on Thursday after a handful of analysts downgraded and cut profit estimates for the insurance company on concerns of rating agency downgrades and a possible capital raise.

Late Wednesday, the Hartford, Conn.-based insurer reported a $2.6 billion loss for the third quarter and cut its full-year profit outlook. The company now expects 2008 earnings to range from $4.30 and $4.50 per share, less than half its estimate in July of $9.20 to $9.50 per share. The quarterly loss was in line with the company’s results which were preannounced earlier this month.

"The risk of a rating agency downgrade and the inability of management to provide comfort on the level of their capital cushion make it very difficult to assess the downside or to argue that there is significant upside in the near term," wrote Fox-Pitt Kelton analyst Gary Ransom in a research note to clients.

Ransom, who downgraded Hartford (HIG, Fortune 500) shares to "In-Line" from "Outperform" and reduced his 2008 profit estimate to $4.30 per share from $5 per share, added that it is difficult to rule out the possibility of an additional capital raise by the company due to "considerable uncertainty" in the financial markets.

Earlier this month, Hartford bolstered capital with a $2 freecreditreport.5 billion infusion from German insurer Allianz SE (AZ).

Insurers have been under pressure to maintain solid capital positions in order to avoid damaging downgrades by ratings agencies. Keeping high ratings is key for insurers because lower ratings can mean higher costs, and in some cases, even a loss of business.

Deutsche Bank analyst Darin Arita also lowered his yearly outlook to $4.45 per share from $5.40 per share, and said in a note to clients, "The life insurance business is suffering from capital strain."

Arita slashed his price target by $18 to $36, but maintained a "Buy" rating on the company’s shares.

Analyst Bijan Moazami of Friedman, Billings, Ramsey lowered his yearly outlook to $4.30 per share from $5.20 per share, and cut his price target on Hartford shared by $3 to $37.

On average, analysts surveyed by Thomson Reuters forecast an annual profit of $5.25 per share.

Shares fell $10.28, or 51.4%, to $9.38 in heavy afternoon trading and earlier bottomed at a multiyear low of $8.23. 

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