The Hartford Wins $3.4 Billion In Federal Bailout Money
May 15, 2009
The Hartford received preliminary approval Thursday for a $3.4 billion federal loan under the emergency bailout program, a deal that would give the insurer breathing room and could ease the company's need to raise money by selling businesses.
Other major recipients of capital infusion from the Troubled Assets Relief Program will include Lincoln National Corp. and Prudential Financial Inc., both of which have significant operations in Hartford, and Allstate Corp., Ameriprise Financial and Principal Financial Group, Treasury spokesman Andrew Williams said. He declined to disclose the amount of investment each company will receive.
As investment losses have mounted at The Hartford Financial Services Corp., especially in the life insurance unit, the company has maintained that it has enough of a capital cushion to meet its commitments to policyholders. But, anticipating further losses, The Hartford confirmed April 30 that it is considering selling businesses.
The Hartford would not comment Thursday on how or whether the TARP infusion would affect a possible sale of businesses. Although it has not commented on published reports that it was seeking bids for its property-casualty unit from Travelers and other companies, the 199-year-old company made clear that a breakup was a possibility.
The Hartford estimated last year that it could obtain up to $3.4 billion from the program and said Thursday that it is prepared to abide by strict regulations that come with the TARP money, which, in the case of banks, have included new rules on executive pay.
"These funds would further fortify our capital resources and provide us with additional financial flexibility during one of the most volatile market climates in our nation's history," said Ramani Ayer, chairman and chief executive officer of The Hartford.
The Hartford, which had 12,500 employees in Greater Hartford at the end of 2008, after laying off about 125, is continuing to reduce it workforce here and elsewhere. The TARP money will not directly affect staffing plans, spokeswoman Shannon Lapierre said.
The Hartford and the other insurers were eligible for the bailout money in part because they received approval to operate a federally chartered bank or savings and loan. The Hartford has agreed to pay $10 million to buy a tiny Florida thrift with 11 branches, Federal Trust Corp. The Hartford invested $20 million in Federal Trust last month, Lapierre said.
The TARP money going to life insurers will not help struggling Phoenix Cos. Inc. The Hartford company had applied for the federal money, but said last month it had to give up on the bailout because the ailing bank it planned to buy had failed.
The insurers notified Thursday are among hundreds of financial institutions in the pipeline "that are being reviewed and funded as appropriate on a rolling basis," Williams said.
Shares of The Hartford rose $2.19, or 17.4 percent, to close Thursday at $14.75. The stock was up another $1.45, or 9.8 percent, to $16.20 in aftermarket electronic trading.
Shares of Philadelphia-based Lincoln National rose 5.2 percent to $17.09 after hours following a 13 percent jump in the regular session. Newark, N.J.-based Prudential Financial tacked on a 3.3 percent gain after rising 6.4 percent in exchange trading to $39.37.
• An Associated Press report is included in this story.
Reprinted with permission of the Hartford Courant.
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