NU Online News Service, March 22, 2:43 p.m.EST

Insurance company rating agency A.M. Best Co. has placed TheHartford Financial Services Group Inc. under review with“developing implications.”

In the meantime, the insurer’s largest shareholder saysHartford’s decision to exit its life business in favor of its property andcasualty operations does not addressHartford’s undervaluation dueto lack of interest from investors and analysts.

“We do not believe today’s actions will materially increaseP&C investor interest in TheHartford,” says John Paulson ofPaulson & Co. Inc., in a statement.

A.M. Best’s financial-strength rating of “A” for the HartfordInsurance Pool is under review with developing implications, andthe Hartford’s key life and health insurance subsidiaries are underreview with negative implications.

McGee says the company will stop new annuity sales effectiveApril 27 and expects to take a related after-tax charge of $15million to $20 million in the second quarter of 2012. He says thecompany is “pursuing sales or other strategic alternatives for itsindividual life, Woodbury Financial Services and RetirementPlans.”

This action is also expected to reduce annual run-rate operatingexpenses by approximately $100 million, pre-tax, beginning in2013.

Paulson says the moves planned byHartfordwill bring in cash andfree capital, but, more importantly to the investor, it willstrengthen the insurer’s ability to split its P&C andnon-P&C businesses, which Paulson says would “create thegreatest short-term and long-term shareholder value and strengthenthe company.”

The news announced by Hartford yesterday is described by Paulsonas a mere “first step.”

Paulson has been encouraging a split, and took his case directly to shareholders. During the insurer’sfourth-quarter conference call, the hedge fund manager, who owns8.5 percent of Hartford shares, was very criticalof CEO Liam McGee’s handling of the company’s falling stockprice.

During the call, McGee said Hartford found the challenges ofsplitting the company’s operations were “significant,” includingthe foreseen difficulty in maintaining competitive ratings whilesetting apart $6.8 billion in debt. The P&C companies wouldhave to assume two-thirds of the debt.

Hartford’s 2011 fourth-quarter net income plummeted 79 percent to $127 millionon above-normal catastrophe and non-cat losses, low interest ratesand volatility in the capital markets.

A.M. Best says Hartford’s execution risk in the current economicenvironment is a concern.

The risk may be lessened “by the perceived attractiveness of theindividual life and retirement services businesses,” thoughHartford has told of no plans to sell.

“A.M. Best notes that the longer it takes to consummate atransaction, the less likely management will generate its targetedproceeds from the sale.”