Hartford shares plunge 52 pct after massive loss

* Hartford shares hit all-time low, close at $9.62

* Cost of insuring Hartford debt rises

* Prudential stock drops 18 percent

(Recasts, adds new information on costs to insure Hartford debt, updates share prices)

By Lilla Zuill

NEW YORK (Reuters) - Shares of Hartford Financial Services Group Inc (HIG.N) plunged nearly 52 percent on Thursday, a day after the property and life insurer posted a much larger than expected quarterly loss, stoking concerns it may need to raise even more capital to survive.

The share decline brought Hartford's market value down to $2.9 billion, not much more than the $2.5 billion that German insurer Allianz SE (ALVG.DE) agreed to inject into the company earlier this month.

Chief Executive Ramani Ayer told investors late Wednesday that the third quarter was the worst in the insurer's 198-year-old history. Hartford lost money mainly from bad investments in financial companies.

"I honestly missed the degree to which markets have cratered," Ayer said late Wednesday.

The loss cut into the company's capital position, a serious problem as agencies decide whether to downgrade the company's credit ratings.

"The company's capital cushion is likely becoming very thin," wrote analysts at Lehman Brothers in a note.

Hartford shares fell to an all-time low of $8.23, before closing at $9.62 on the New York Stock Exchange, down $10.24.

The cost of insuring Hartford debt rose, indicating that investors see greater potential for default. Credit default swaps rose about 1.39 percentage points to 6.05 percent, or $605,000 annually for five years to insure $10 million of debt, according to Markit Intraday.

Hartford said it was taking a number of steps in hopes of improving its fortunes -- including cutting costs, repricing retirement products linked to the markets, and repositioning investments to a focus on "higher credit quality."

It is also counting on market conditions getting better as a government rescue plan rolls out.

RIVALS ALSO FALL

MetLife Inc and Prudential Financial Inc, two other big U.S. life insurers, posted quarterly results on Wednesday that marginally missed Wall Street expectations.

The shares of each gained in early trading, but posted losses later in the day.

MetLife (MET.N), the largest U.S. life insurer, reported a 43 percent drop in quarterly operating income, short of the average analyst target.

The company also recently moved to bolster capital, with an offering that raised $2.3 billion.

MetLife said it is trimming its securities lending program and raising prices for products that have "living benefits," designed to give holders a guaranteed stream of income.

Prudential (PRU.N), the No. 2 U.S. life insurer, reported a quarterly net loss. Its operating profit missed analysts' average target, according to Reuters Estimates.

MetLife stock closed up 2.2 percent to $30.20, while Prudential fell 18.1 percent to $28.87.

(Additional reporting by Dena Aubin and Jonathan Stempel; Editing by John Wallace, Jeffrey Benkoe and Matthew Lewis)