"Hartford is financially strong and well capitalized," Hartford
Chief Executive Ramani Ayer said in a statement.
The statement followed an announcement Friday by Fitch Ratings
that it was lowering Hartford's default rating to A from A+, and
its insurer financial strength ratings of Hartford's primary life
and property/casualty insurance subsidiaries to AA- from AA.
Today, Moody's downgraded the company's debt by one notch as
well. "The Hartford's recently released final third-quarter
results and continuing weakness in both credit and equity markets
have confirmed our concerns," said Jeffrey Berg, Moody's senior
vice president, in a statement.
However, Ayer came out swinging in defense of the company's
stock, which was crushed on Thursday.
He said should further capital be needed, Hartford would not
have to tap public markets during the current credit crisis and
instead could use a $500 million contingent capital facility and a
$1.9 billion bank credit facility.
This situation highlights the new role of chief executives
during this financial crisis. In times past, executives would
let the market sort out a mess like this, where the company's stock
is cut in half on false rumors and negative sentiment. Today,
CEO's are forced to come out swinging against a market desperate to
hedge their increasingly risky leveraged long positions and looking
for vulnerable companies. In fact, hedge funds and analysts
have been very open and obvious about each and every target.
Hartford for almost a month has had a barrage of negative
articles and analyst warnings. Reality doesn't seem to matter
when the wolves are surrounding. They pile on for profit and
do not wait for an uptick.
But when the CEO comes out defending, things can change.
It is an important lesson for all companies out there to increase
openness and transparency in a time where fund managers are looking
for weakness to establish profitable short positions. Look
out for CEO's who are willing to come out swinging and beware of
the quiet idealistic ones who believe that the market is ultimately
fair.