By Alistair Barr

Hartford Financial Services Group Inc. shares fell 21% Friday, hours after the insurer posted an $806 million fourth-quarter loss and cut its divdend to preserve capital in the midst of a withering financial crisis.

Hartford Financial's shares slumped to $11.95 ahead of the open, tracking declines in the aftermarket on Thursday.

"[The decline] seems an overreaction as the results are not so far from the range of outcomes investors might have anticipated," Citigroup analysts said Friday. "We believe the market anticipates a downgrade, but should the rating agencies not act over the next day, we believe the stock will rally off lows it will set at the market open."

The quarterly net loss worked out to $2.71 a share, a reversal from net income of $595 million, or $1.88 a share, generated in the final three months of 2007, the Hartford, Conn., insurer (HIG) reported.

Excluding net realized investment gains and losses and other items, Hartford Financial said the loss was $208 million, or 72 cents a share.

Hartford Financial had been expected to make $1.25 a share, according to the average estimate of 16 analysts in a FactSet Research survey.

Hartford Financial also said it plans to reduce its quarterly dividend to 5 cents a share, a move designed to preserve roughly $350 million of capital a year. The company paid a quarterly dividend of 32 cents a share early this month.

"We are optimistic about the resolve shown by the federal government in its efforts to stimulate the economy, but the risks still appear severe," Chief Executive Ramani Ayer said. "As a result, it is prudent for us to put capital preservation and risk mitigation at the forefront of our priorities in 2009."

-Alistair Barr; 415-439-6400; AskNewswires@dowjones.com