It was another of Hartford's corporate decisions which is clearly counterproductive to its own interests.
Wayzata, MN (PRWEB) September 7, 2010
Bob MacDonald, former CEO of Allianz Life of North America, today publicly denounced Hartford Financial Services Group for what he calls, the insurance icon's recent "sleight of hand" in its variable annuity line.
Writing in his blog, http://www.bobmaconbusiness.com, MacDonald chides Hartford's management and board of directors for undoing all the success the company has achieved during the past 200 years.
"Hartford's incapable, incompetent and inept managers have driven Hartford to the very brink of bankruptcy," he said. "Management took risks they did not understand, assumed risks they could not manage, and put the company in a position to be anti-selected against by outside forces. Only a bailout by the government, an investment of $2.5 billion by Allianz SE and some friendly changes in regulatory requirements saved the company," he said.
MacDonald, who also was formerly CEO of ITT Life, wholly-owned by Hartford, was particularly riled by what he said was Hartford's recent financial deception regarding its line of variable annuities. Hartford management, said MacDonald, formerly offered an investment product - the variable annuity - with the guaranteed benefits of a fixed insurance product. MacDonald says the product's design is the epitome of self-deception since guaranteed benefits on this kind of variable annuity are a form of financial suicide as the ongoing financial crisis has shown. To compound the problem, said MacDonald, Hartford made risky investment decisions designed to support the irrational promises in the products. History shows us that both of these approaches were contrary to the best interests of the company. Yet, management, he said, made them with gusto.
According to InvestmentNews.com, which first reported the annuity deception, Hartford recently sent a letter to customers who had purchased the older variable annuities - the ones with the impossibly high guarantees. The letter offered the policyholders what they termed a "Personal Retirement Manager Exchange Program Opportunity" that allowed them to trade their old contracts for the newly priced variable annuity.
According to MacDonald's blog, the new "program opportunity" was clearly an attempt by Hartford management to get out from under these older policies at the expense of customers. While the letter says the new products offer "new features," it offers no explanation what those features might be and no warning to the policyholders that they would forfeit important benefits and guarantees by accepting the Hartford offer.
Worse, said MacDonald, the letter was sent to policyholders without first informing the agents who originally sold the policies. The objective was obvious: management wanted to circumvent the distribution system and appeal directly to the policyholder with this "offer." The Hartford was rightly concerned that the agents would explain to their clients that the offer being made by Hartford was not in their best interests and encourage them to ignore it.
"What makes the action of Hartford management so dim-witted was their apparent belief that they could accomplish this clumsy sleight-of-hand without the policyholders understanding it, or the agents getting wind of it and react negatively toward the company," said MacDonald. "It was another of Hartford's corporate decisions which is clearly counterproductive to its own interests."
MacDonald says a firestorm of protest has already flared from the Hartford distribution system and from consumer advocates over the letter. The distribution system is not only frustrated by the actions of Hartford management, but more important, they are also beginning to question whether they can trust the company with future sales.
"This thoughtless blunder is completely at odds with one of the first statements uttered by Liam McGee after being named Hartford CEO less than one year ago," said MacDonald. "One of the core strengths of Hartford, McGee was quoted as saying, was the 'enduring relationships with the distribution partners.' Obviously, enduring relationships are really unimportant to Hartford," MacDonald said.
MacDonald claims that despite all that has happened to the success and good name of Hartford over the past few years, the management of the company is still highly capable of consistently making decisions that are not in the best interests of the company. Clearly the CEO, who has no insurance experience, has demonstrated his inability to change the environment of self-destruction at Hartford.
Bob MacDonald was formerly CEO of ITT Life, wholly owned by The Hartford. He founded LifeUSA, which he sold to Allianz SE in 1999 $540 million and became CEO of Allianz Life of North America. Since 2002 MacDonald has headed CTW Consulting, LLC, a vehicle for offering his experience and unique approach to management and corporate culture development.
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