DOW JONES NEWSWIRES
Hartford Financial Services Group Inc. (HIG) announced plans to
sell up to $750 million in stock as the insurer formally announced
it will participate in the Treasury Department's Troubled Asset
Relief Program.
The company had been expected to participate, with it being
among the most enthusiastic after the government last month decided
to allow six major insurers to tap into TARP for additional
capital. Hartford was made eligible for $3.4 billion.
Hartford said it would use proceeds of the stock sale for
general corporate purposes, including the possible repurchase of
outstanding debt. It joins a number of other companies across many
industries that are taking advantage of investor appetite for new
shares to raise capital.
Chairman and Chief Executive Ramani Ayer, who recently announced
he will retire by year's end, said the decision to participate in
TARP and sell shares would boost Hartford's financial strength and
help it implement its long-term capital plan.
The program began last fall after the collapse of the financial
markets, when financial firms were unable to raise new cash through
stock offerings or other private deals because of the credit market
crunch. Now, many banks who took the money then are working to
repay it as quickly as possible to avoid the strict restrictions,
especially on executive pay, that come with it.
Hartford's shares were down 0.6% at $14 in recent premarket
action. Despite more than doubling in the last three months, the
stock is still off more than 80% in the year through Thursday's
close. The company's market value is about $4.6 billion.
JPMorgan analyst Jimmy Bhullar said last week that he would view
life insurers taking TARP money as a sign they are in trouble. He
added participating in the program could hurt a company's ability
to attract talent as well as its reputation among investors.
As it tries to weather the tough environment, Hartford recently
said it would stop writing new business in Japan starting June 1
because of competition and continued turmoil in financial markets
and would suspend writing all business in the U.K. while serving
current customers. A plan to start sales in Germany was
canceled.
The company also said it will make changes at its U.S.
variable-annuity business, including raising prices and launching a
new product with a lower risk profile in the third quarter.
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089;
kerry.grace@dowjones.com