The story of financial institutions teetering at the edge of an abyss in 2009 and 2010 remains alive today, with rules under the resulting Dodd-Frank Act still being cranked out (with many more to come).
Since the carnage of autumn 2008, when Lehman Brothers, Merrill Lynch and Bear Stearns all vanished as stand-alone going concerns, most large financial firms have managed to survive. But for many of them, it hasn’t been easy.
A case in point: The Hartford Financial Services Group, the big insurer. On March 6, 2009, its stock price bottomed out at $3.62. Less than two years earlier, on May 21, 2007, the shares had reached $105.54. The main culprits were the same ones that dealt grievous blows to many other financial firms: an investment portfolio heavily weighted in structured mortgage-backed and asset-backed securities, which became virtually worthless during the financial crisis, and risk-management systems that failed to detect the looming disaster. The Hartford ended up writing off $7 billion worth of value on the toxic securities.
The stock had fought its way back up to $30.58 as of late Wednesday morning, with much of the growth coming during the past year. But the turnaround began in the fall of 2009, when a new CEO, Liam McGee, came on board. A few months later he hired a new CFO, Chris Swift, who had headed finance at AIG. The two aggressively attacked the balance sheet, retired debt, revamped risk management and eventually established a more solid footing for the company.
Something of a watershed moment came in 2012, when the firm decided to divest its life insurance, retirement planning and 401(k) management businesses and focus on other business lines that showed potential for greater returns. All three deals closed in January 2013. Finance chief Chris Swift recently sat down with CFO to discuss those moves, how he and McGee went about rescuing the firm and his views on some new and proposed regulations. An edited transcript of the discussion follows.