Hartford Financial Services Group Inc. is going ahead with overseas expansion plans, an executive says, after a quarter it called "the most challenging in its history" and the announcement of a $2.63 billion loss that knocked the share price down 58% last week, forcing the company to announce job cuts Tuesday.

Hartford said it will cut 500 jobs this month, or about 2% of its work force, because of losses in its investment portfolios and declining revenue.

Nevertheless the Connecticut insurer plans to introduce two variable annuities in Germany in the first quarter, and an executive said it is considering expanding further in Europe and Asia.

Peter Smyth, an executive vice president in Hartford's international markets group, said the company has offices in Japan, the United Kingdom, Ireland, Canada, Brazil, and Germany. It is focusing on the world's largest pension markets outside of North America, in Asia and Europe.

"We are the No. 1 seller of variable annuities in Japan as measured by assets under management, and we are among the leading sellers of variable annuities in the United Kingdom," he said. "Our strategy is to provide retirement solutions for each country we enter."

Mr. Smyth said in an interview last week that he could not specify a timeline for global expansion, but he said the company plans to accelerate international growth and to enter one or two markets a year during the next few years.

Because most of the world's wealth is outside the United States, he said — in Asia and Europe, where populations are aging and retirements are picking up, people are increasingly focused on the need to save and invest for retirement and to generate income while in retirement.

He said the credit crisis has Hartford focused on selling variable annuities with guarantees. "These guarantees protect our clients from market volatility by guaranteeing them an income over several years or even for life," he said. "Anyone who has been watching the volatility in the global markets can readily see the value of guarantees."

Rachel Alt-Simmons, a research director in the insurance practice at TowerGroup, an independent research firm owned by MasterCard Inc., said that key U.S. insurance markets are maturing and globalization gives insurers opportunities not only to diversify geographically but also to identify new target markets for products and services.

A market-driven approach to the insurance industry, facilitated by regulatory reform, has opened up new markets to foreign insurers, she said.

"The Asia-Pacific region, including India and China, represents the dominant opportunity for U.S., Canadian, and European multinational life insurers," she said. "Emerging markets in Central Europe and Central-South America present attractive opportunities for Western European insurers, while Japanese insurers have their eye on the United States and Western Europe. For all insurers we spoke to, home markets continue to provide opportunity for expansion and growth."

Ms. Alt-Simmons said that, globally, retirement demographics continue to supply compelling business and revenue opportunities for wealth accumulation and retirement income products, primarily in the form of annuities. Tax and pension reforms are creating opportunities in some of the largest insurance markets as well as opening doors in emerging markets, she said.

Some insurers take an extremely conservative approach in their acquisition strategies, she said, choosing to expand global operations organically instead of taking on joint ventures or acquisitions. This strategy is different from the approach taken by other large multinationals.

"Mega-insurers such as Axa, Allianz, Prudential, MetLife, and Manulife, for example, have all made significant inroads in emerging markets through acquisitions," she said. "The advantage of acquisitions is that an insurer immediately has a presence in a target market and can leverage existing operations or distribution networks. In using an organic approach, the insurers' competitive advantage is their ability to leverage their business/distribution model[s] that have been successful in home markets and adapting [them] to new markets — something that competitors can't immediately copy."

Mr. Smyth said Hartford was among the first foreign insurers to offer variable annuities in Japan and the company is building a leadership position in the new variable annuity business in the United Kingdom, he said. Next year, it will be competing in Germany's fledgling variable annuity industry.

Ms. Alt-Simmons said to meet the need for retirement income variable annuities began being sold in Japan in 1999 after regulators approved the products. Hartford entered the market in 2000 and success brought competition, she said, as other large players entered Japan. "Other 'fast followers' began to flood the market, and pioneers in this market are now looking at other opportunities in Asia-Pacific, especially China, Hong Kong, and Korea," she said.

Ms. Alt-Simmons said the difficulty right now is that many insurers are having trouble raising capital so that large acquisitions and expansions are out of the question. Some top-tier insurers in both the United States and Europe are well positioned to buy, she said, but everyone is waiting for the bottom before acting.

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