Hartford Sets up $66M Legal Reserve for Probes
The company disclosed in a US Securities and Exchange Commission (SEC) filing that it had taken a charge of $66 million, or 22 cents a share, to first-quarter earnings for the reserve to resolve the probes involving Hartford Life, according to a Hartford Courant report.
The reserve is for SEC investigations into market timing and directed brokerage and a parallel probe by New York state Attorney General Eliot Spitzer of market timing. The Hartford has previously said that in 2003, it discontinued directed brokerage in connection with mutual fund sales (See Hartford Agrees to Market Timing Compensation with Mutual Funds ).
Not included in the reserve are funds to resolve allegations last October by Spitzer that two of The Hartford’s commercial property-casualty offices provided bogus bids for bid-rigging by broker Marsh & McLennan Cos. In addition to his mutual fund industry probe, Spitzer has also been aggressively investigating insurance sales practices such as contingent commissions and other issues. The Hartford was implicated, but not named a defendant, in Spitzer’s October lawsuit against Marsh (See Spitzer Takes On Contingent Commissions ).
The Hartford cautioned that the ultimate cost of the market timing and directed brokerage issues could be significantly more or less than the $66 million charge. There may also be uncertainty about the tax deductibility of any payments, the company said.
Hartford also disclosed that it has expanded its internal review to its group benefits business, which includes life and disability insurance beyond its ongoing look at its property-casualty operations.
Also Thursday, Connecticut Attorney General Richard Blumenthal confirmed that his office recently sent The Hartford a subpoena concerning its group annuity business. “The issues under investigation are similar to the ones in other lines, such as property-casualty, involving undisclosed compensation or payments” to brokers, Blumenthal said.
Spitzer’s office previously sent The Hartford a subpoena on the group annuity business.
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