Ratings looks at a company's risk-and-reward potential in its "Is It Safe?" feature. Look for your stocks at 4 a.m. on Tuesdays and Thursdays.

The Hartford

(HIG) - Get Report

has a conundrum.

The official AARP provider of choice for auto and home insurance represents itself as a pillar of the community. It also symbolizes how offering guaranteed minimum payments on variable annuities can come back to bite you. How can the insurer demonstrate stability?

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The Hartford, which lost $2.7 billion in 2008, has said it will no longer try to drum up business in Japan or the U.K. The insurer has canceled plans to expand into Germany and may sell its loss-making Canadian life unit to

Sun Life

(SLF) - Get Report

. It has announced some layoffs, and Chairman and Chief Executive Officer Ramari Ayer is stepping down this year.

The Hartford and

Lincoln National

(LNC) - Get Report

are the only insurers that will take Troubled Asset Relief Program funding. The Hartford will take $3.4 billion and give the Treasury preferred shares and warrants for common stock. The insurer will now fall under the watchful eye of the proposed new federal banking regulator.

Like it or not, The Hartford probably would have failed to raise this much capital from the market, at a price it was willing to pay, and TARP funding is comparatively cheap.

The decision also adds a big check mark to the additional capital box despite analysts' concerns about the message being sent. It will provide policyholders some comfort to know that the insurer is now government-backed.

The Hartford's problems are self-inflicted, most notably the overly generous guaranteed minimum returns on variable annuities. A year later, the insurer is still taking hits as losses stretched into the first quarter.

The company's stock is volatile and fully deserves its 2.23 beta. (One is a perfect correlation with the stock market.) The shares are trading at around $12, down from a record high of $105 two years ago.

The Hartford's shares are trading so far below book value, at 47%, that only a few insurers are lower.


(GNW) - Get Report

is at 32% of book value.

Despite the walloping the stock has taken, trading down 83% in the past year, and the missteps with variable annuities, it's hard to argue that The Hartford isn't a fundamentally sound company. The company probably will be unprofitable again this year, though next year could be a different story.

The losses incurred so far are nothing like the appalling numbers from

American International Group

(AIG) - Get Report

. So we can give The Hartford a break. Ratings gives The Hartford's stock a "sell" recommendation.

TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.

Gavin Magor joined Ratings in 2008, and is the senior analyst responsible for assigning financial strength ratings to health insurers and supporting other health care-related consumer products, including Medicare supplement insurance, long-term care insurance and elder care information. He conducts industry analysis in these areas. He has more than 20 years' international experience in credit risk management, commercial lending and analysis, working in the U.K., Sweden, Mexico, Brazil and the U.S. He holds a master's degree in business administration from The Open University in the U.K.