Regulators at the U.S. Securities and Exchange Commission have directed The Hartford Financial Services Group Inc., to provide additional details on $2.1 billion of securities that have traded at less than half of what the company says they're worth for more than a year, Bloomberg reports.
In a letter to the company dated April 13 and disclosed on Monday, the SEC notes that the unrealized loss on these investments, held by Hartford's life insurance subsidiary, totaled $1.5 billion as of Dec. 31.
In the letter to Glenn Lammey, chief financial officer of Hartford's life insurer, Jim Rosenberg, senior assistant chief accountant, allegedly said: “Please revise your disclosure to indicate the nature of these securities and to explain why these unrealized losses, which appear to be significantly greater than credit spreads in the marketplace, are apparently not indicative of credit losses and/or other-than-temporary impairment.”
The Hartford willingly agreed to include more information on the securities in its quarterly filings, according to a reply from the insurer to the SEC dated April 27. The holdings are primarily commercial mortgage-backed securities and collateralized debt obligations tied to commercial property and have floating coupon rates, said the insurer.
The Hartford remarked that the drop in market prices reflects “market illiquidity and risk premiums,” notes Bloomberg. Further, the insurer “has concluded that no credit impairment exists for these securities. Furthermore, the company neither has an intention to sell nor does it expect to be required to sell these securities.”
Losses on the investments “may be significant” if property values perform worse than the company expects, The Hartford said.
The Hartford’s investment losses, which totaled some $4 billion and have been the subject of several news reports, led to the company’s acceptance of $3.4 billion in Troubled Asset Relief Program (TARP) funds in 2008. The insurer repaid its $3.4 billion U.S. bailout in March.