As the current economic environment continues to take its tollon The Hartford, the company's chairman and CEO Ramani Ayer, whowill be stepping down at year-end, acknowledged how challenging thelast nine months have been. But he said the company, armed with anew strategy to focus on its core strengths, is positioned torebound effectively.

Speaking to the unprecedented struggles driven by the financialmeltdown, Mr. Ayer said, “For me, by far, there is nocomparison–last year has been the most challenging in my entirelife.”

He credited the Federal Reserve, Treasury, and theadministration as a whole with taking measures to ensure theeconomy did not go into a complete tailspin, stating that they havedone an “outstanding job” given the circumstances.

He stated, “I think you and I will live to tell ourgrandchildren what the year 2008 looked like from an Americaneconomic environment perspective.”

For The Hartford, Mr. Ayer said he and a lot of others acrossmultiple industries simply did not see the financial meltdowncoming. “We did not foresee, and a lot of very great minds did notforesee, what happened in the fourth quarter of last year, andcontinued to persist through the first quarter of this year,” hesaid. “That was clearly one that was not seen by most people.

“But 20/20 hindsight, obviouslyless exposure to [banks and other financial companies], and lessexposure to commercial mortgage backed securities–if we had had theforesight to be able to lighten up on all of that, it would havebeen a good thing. But we don't have that luxury today.”

Looking to the future, and what The Hartford needs to do as acompany to recover, Mr. Ayer said, “We went through an in-depthanalysis of what the company's strategy should be going forward,and we concluded that the best way to deliver long- term value toshareholders is to return to our core historical strengths as aU.S.-centric insurance company, and that's really what we havedone.”

He said the company will focus on property-casualty, groupbenefits, life, and then have wealth management business in mutualfunds and retirement plans. The annuity business, he noted, will besubstantially re-structured.

“In a nutshell,” Mr. Ayer said, “I'd say the company's on surefooting at this time, and now it's our job to go out there and winthe hearts and minds of our distribution [system].”

Shellie Stoddard, an analyst with Standard & Poor's,indicated the future of The Hartford is still uncertain, noting thecompany is currently at a “strategic crossroads” as it makes thedecision to de-emphasize international and institutionalbusiness.

She said the company “continues to face significant challengeswith the credit cycle and the level of instability in the equitymarkets.”

In receiving an expected $3.4 billion in Troubled Asset ReliefProgram (TARP) funds that it qualified for, Ms. Stoddard said thatwill add some financial flexibility that the company haslacked.

The Hartford also received a $2.5 billion investment by Europeaninsurer Allianz in October 2008.

Overall, Ms. Stoddard said S&P will monitor The Hartford'sexisting product lines on the life and p-c sides to see if thecompany can maintain its distribution and level of sales so thatits credit position is not permanently impaired. If the company issuccessful, she said, earnings should follow and the company canrebuild capital.

Paul Bauer, an analyst with Moody's Investors Service, said,“The Hartford's biggest challenges are likely to be managing futureinvestment volatility, maintaining the company's historicallystrong franchise and reputation during a time of turbulence, andsuccessfully reducing some of their product risk, particularly intheir annuity business, without losing customers.”

Currently, Moody's has an “A2″ financial strength rating on theHartford p-c operations, and S&P's rating is “A.”

On the impending leadership change at The Hartford, Ms. Stoddardsaid S&P is “fairly indifferent.”

In a report released this month by Citi Investment Research,Analyst Joshua Shanker noted that Mr. Ayer's departure willrepresent the “fifth and most significant member of top managementto leave the company in two years. While the board begins anexternal search for new top management, we believe that ameaningful management vacuum has been created where futurestrategic decision making could be stifled.”

Mr. Ayer played down the idea of a leadership vacuum at TheHartford and expressed his confidence in the board's ability tofind a successor. “On the leadership gap,” he said, “I just want tobe very clear. The board has a search committee, and I'm quiteconfident we will be very successful replacing me.”

He said the company will likely be looking for one replacement,rather than splitting the chairman and CEO roles as AmericanInternational Group is doing as that company searches forreplacements for current chairman and CEO Edward Liddy.

Mr. Ayer said, “I believe The Hartford's board for now hasdecided that that role is one role. My successor will be thechairman and CEO of The Hartford.”

As noted by NU Editor-In-Chief Sam Friedman in hiseditorial for this edition, Mr. Ayer was not just a leader at TheHartford, but a leader within the industry as well. (See page5.)

Leigh Ann Pusey, president and CEO of the American InsuranceAssociation also spoke to Mr. Ayer's industry leadership. In astatement e-mailed to NU she wrote, “Ramani's presence andleadership style will be sorely missed. From Graham-Leach-Bliley toTerrorism Risk Insurance, [he] played a pivotal and influentialrole in helping shape key policies that impact property-casualtyinsurance. No one understands the industry's core mission andguiding principles better.”

Commenting on whether there is a leadership gap in the industry,Mr. Ayer said, “I think there are some very good leaders in the p-cindustry.” He cited Travelers' Jay Fishman, ACE's Evan Greenberg,Chubb's John Finnegan, and State Farm's Edward Rust as examples ofinsurer chief executives who can also speak effectively to majorissues facing the industry.

Mr. Ayer said fighting for the Terrorism Risk Insurance Act andits two extensions were examples of how the industry was able tospeak with one voice and get needed reforms in a critical area.

Reflecting on his decade-plus tenure as chairman and CEO of TheHartford, Mr. Ayer spoke about both the successes and thechallenges over that time.

“I think over the last decade, as a company, we have reallybuilt a very strong business in p-c, group life disability; lifeinsurance.” He added the company is strong and emerging in mutualfunds and retirement products as well, and he said it had a verystrong variable annuity business that is now being restructuredgiven the effects of the financial crisis.

For the challenges, aside from the current financial crisis, Mr.Ayer said the past decade has seen big events occur on both thelife and p-c sides, and some events that hit both areas at once. Hesaid some major events have been: the September 11 attacks in 2001;the bursting of the telecom/media/technology bubble shortly after,which included the Enron and Worldcom scandals; the brokercompensation issues in 2004 and 2005; and the major hurricanes of2005 and 2006.

Regarding the company he is leaving behind to his successor, Mr.Ayer said, “We are a very proud company,” noting that The Hartfordis the second oldest insurance company in the United States.

“This is a great company with great assets,” Mr. Ayer said. Hepointed to the company's distribution system, historicrelationships, service to customers, and culture of integrity asadditional strengths.

“Hartford is clearly one that believes very strongly that ourbrand is all about the promises we keep,” Mr. Ayer said.