Hartford Financial ( HIG) is in talks to sell most of its unprofitable life insurance unit to Canada's Sun Life Financial ( SLF), Bloomberg reports, citing three people with knowledge of the matter. Breaking Hartford in two and selling most of the life division, which has $247.9 billion of assets, is among the options being discussed, Bloomberg reports. An agreement still may not be reached, said the people. Hartford held separate talks with MetLife ( MET) that ended last month, two of the people said. Standard & Poor's on Tuesday downgraded Hartford Financial and its subsidiaries one notch, citing concerns about the insurer's ability to raise capital in a worsening economy. S&P lowered its counterparty credit rating on Hartford to an investment-grade "BBB," down from "BBB+." The counterparty credit and financial strength ratings on all Hartford's subsidiaries was cut to "A'' from "A+." The outlook on all the companies is negative, reflecting concerns about Hartford's ability to raise cash to meet potential future funding needs, analyst Shellie Stoddard wrote. Insurers have been hit hard by the financial market meltdown. Last month, Hartford Financial reported a loss of $806 million, or $2.71 a share, for the final three months of 2008. The loss included a $610 million realized capital loss and another $597 million loss tied to the write-off of goodwill. Bloomberg notes that Hartford, which as recently as 2007 was relying on the life business for most of its revenue and profit, is getting stung by costs to cover minimum-return guarantees on variable annuities linked to the performance of stock markets. The S&P 500 closed Tuesday at a level not seen for more than 12 years. The index fell 4.49 points, or 0.6%, to 696.33, its first finish below 700 since October 1996.