Hartford to Buy S&L, Tap Into TARP
Property/casualty insurer Hartford Financial Services Group Inc, concerned over capital levels, announced on Friday that it agreed to buy a small savings and loan, making it eligible to raise up to $3.4 billion from the U.S. government's bank bailout plan.
An infusion may alleviate investor concerns about capital at Hartford, which suffered a $2.63 billion third-quarter loss, and last month raised $2.5 billion from German insurer Allianz SE.
Hartford said it agreed to buy Sanford, Florida-based Federal Trust Corp, which operates the 11-branch thrift Federal Trust Bank, for $10 million.
The insurer said it plans to recapitalize Federal Trust, and has applied to the federal Office of Thrift Supervision to become a savings and loan holding company.
Hartford said the developments should allow it to sell $1.1 billion to $3.4 billion of preferred shares to the government under the Treasury Department's $700 billion Troubled Asset Relief Program (TARP).
"We are taking these actions as a strong and well-capitalized financial institution looking for maximum flexibility and stability," Chief Executive Ramani Ayer said in a statement.
Hartford is joined by Genworth Financial Inc., Lincoln National Corp. and Aegon NV, a Dutch company, which owns U.S. insurer Transamerica, in asking the Office of Thrift Supervision for permission to acquire an existing savings and loan.
Hartford’s interest in the Treasury's program puts it at odds with the official position of the American Insurance Assn., of which its subsidiaries are members. The AIA opposed insurer participation in the TARP in a statement last month.
Published on November 17, 2008
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