Hartford Financial to Pay Back $2.43 Billion to Allianz
April 3, 2012 by Meg Green
Best’s News Service – April 02, 2012 03:13 PM
HARTFORD, Conn. – Hartford Financial Services Group said it would buy back $2.43 billion in securities from Allianz SE, which ends the financial support the company received during the 2008 financial crisis.
Hartford said it would repurchase all outstanding 10% fixed-to-floating rate junior subordinated debentures due 2068, with an aggregate principal amount of $1.75 billion and all outstanding warrants entitling Allianz to purchase 69.4 million shares of the company’s common stock. The repurchases are expected to close on April 17.
These transactions are expected to reduce Hartford’s anticipated annual interest expense by replacing high interest coupon debt with lower coupon debt. In addition, the transactions are intended to result in a better balance between Hartford’s senior and subordinated debt, the company said in a statement. Attempts to reach the company for additional comment were not immediately successful.
The warrants will be repurchased for $300 million as part of the company’s existing $500 million equity-repurchase program. The company intends to complete on a timely basis the remaining authorization of about $106 million.
The warrants and debentures were initially issued to Allianz in 2008. After the repurchases, Allianz will hold about 5% of the company’s outstanding common stock.
Hartford has taken numerous steps to improve capital and liquidity since late 2008, including raising $2.5 billion from Allianz Societas Europaea in October 2008, according to BestLink. In addition, on June 26, 2009, Hartford sold to the U.S. Department of the Treasury 3.4 million shares of fixed rate cumulative perpetual preferred stock and a 10-year warrant to purchase up to 52.1 million shares of common stock for $3.4 billion as part of the Capital Purchase Program established by the Treasury. On March 31, 2010, Hartford repurchased all of its preferred shares issued to the U.S. Treasury under the CPP for $3.4 billion. The repurchase was funded with proceeds from equity and debt offerings, as well as from available resources. On Sept. 27, 2010, the Treasury sold its warrants in Hartford through a secondary public offering for net proceeds of approximately $706 million. Hartford did not receive any proceeds from this sale, according to BestLink.
Last month, Hartford Financial (NYSE: HIG) said it’s placing its U.S. individual annuity business into run-off and pursuing “a sale or other strategic alternative” for its individual life insurance and retirement plans businesses and Woodbury Financial, its broker-dealer subsidiary.
The insurer said it would focus on its property/casualty insurance, group benefits and mutual funds businesses, “each of which has a competitive market position, strong capital generating ability and lower sensitivity to capital markets” (Best’s News Service, March 26, 2012).
On March 21, A.M. Best Co. placed under review with developing implications the issuer credit rating of bbb+ and the debt ratings of the Hartford Financial Services Group Inc. and the Best’s Financial Strength Rating of A (Excellent) of the Hartford Insurance Pool. A.M. Best also placed under review with negative implications the Best’s Financial Strength Ratings of A (Excellent) of the Hartford’s key life/health insurance subsidiaries (Best’s News Service, March 21, 2012).
Shares of Hartford were trading at $22.15 a share on the afternoon of April 2, up 5.15% from the previous close.
(By Meg Green, senior associate editor, BestWeek: Meg.Green@ambest.com)BN-NJ-04-02-2012 1513 ET #
