Hartford Financial Services Group ( HIG) shares were fell as much as 15% Tuesday after Moody's Investors Service downgraded its debt, predicting weak results ahead due to the firm's exposure to variable annuities and other investment losses.

Moody's downgraded the Connecticut-based insurer's senior debt two notches, to "Baa3" from "Baa1," the lowest level in the investment-grade ratings. The firm's insurance financial-strength ratings for its core property and casualty business dropped one notch to "A2" from "A1," while its life insurance subsidiary ratings declined two notches to "A3" from "A1." Short-term debt took a hit to "P-3" from "P-2."

Moody's held a negative outlook for further action on Hartford's ratings, citing an expectation of weaker earnings and capital levels as a result of investment losses and variable annuity payouts. An uncertain outlook for the stock and debt markets creates a "meaningful" potential for earnings to drop below Moody's current expectations, the agency said.

Variable annuities are an investment product that is pitched as a retirement fund with insurance. Insurers guarantee a set monthly payout, regardless of how assets perform in the market -- leaving Hartford and competitors like Lincoln National ( LNC) on the hook for payments, despite big declines in the market.

Variable-annuity assets lost 13%, or $170 billion, in value during the fourth quarter alone, according to NAVA Inc., which monitors those data.

Hartford shares fell as far as $6.52 on Tuesday, but recently were down 5.6% to $7.28.

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