Asbestos Liability, Unstable Markets Threaten Hartford Financial's Earnings.

By Matthew Lubanko, The Hartford Courant, Conn. Knight Ridder/Tribune Business News

May 17--The Hartford stag, though hobbled by a serious asbestos injury earlier this week, can still run with the swift in the financial services herd.

The company remains the No. 1 seller of variable annuities. Property-casualty insurance premiums continue to grow at a double-digit clip. The Hartford's mutual funds, starting from ground zero in July 1996, today manage $15 billion in assets.

But investors in The Hartford Financial Services Group Inc. have little to show for their faith in the home team. Shares have registered a 5.3 percent total return in 2003, despite an 8.1 percent year-to-date total return for the Standard & Poor's 500 index. Total returns came in at minus 19.4 percent during the five-year period that ended April 30, trailing the S&P 500 and many of its peers, including AIG, Ace Ltd. and XL Capital.

The future, at this moment, hardly looks more promising for shareholders, some analysts say.

A sluggish, albeit improving stock market makes it difficult to boost assets in the life and annuity business; assets generate fee income. Low interest rates lead to puny yields from bonds, which means it takes greater sums of premium dollars to …