Hartford Insurance Loses Access to Government Lending After Ratings Downgrades

This news helped to take the US equity indices down to new lows when it came out.

Reuters
Hartford loses access to U.S. lending facility, shares plunge
Thursday February 12, 2:07 pm ET

NEW YORK (Reuters) - Hartford Financial Services Group Inc lost access to a U.S. commercial paper lending facility after recent debt rating downgrades, it said in a regulatory filing, and shares dropped 11 percent.

In the filing on Thursday with the U.S. Securities and Exchange Commission, Hartford (NYSE:HIG), a large life and property insurer, said it will have to repay the $375 million borrowed under a federal program.

That happened after its commercial paper ratings were downgraded by Moody's Investor Services on February 6, and by Standard & Poor's and Fitch on February 9.

As a result it will have to tap other sources of cash to repay the debt, a potential thorn as its capital had already eroded due to large losses over the past two quarters.

Also Thursday, Hartford said the Connecticut insurance department approved changes to the way it can account for some reserves. The decision effectively boosted its life insurance unit's capital by about $1 billion.

Analysts said the move was not enough to offset bigger capital concerns, and may not protect it from ratings downgrades, which could trigger the need to raise additional capital. Hartford raised $2.5 billion in capital from German insurer Allianz SE last October.

The regulatory relief is "better than nothing, but it doesn't necessarily follow that this will put it (Hartford) in a better position with the rating agencies," said Steven Schwartz, a life insurance analyst at Raymond James.

The Connecticut insurance department's decision to grant Hartford the regulatory relief came after a national group of insurance regulators voted on January 29 not to approve such changes for life insurers nationwide.

U.S. life insurers have lobbied for regulators to ease capital rules after heavy losses on investments, and on sales of variable annuities, a popular retirement product that accounts for much of the sector's business.

Hartford and others have also sought capital injections under the U.S. government's $700 billion financial services rescue plan.

Shares of the Connecticut-based company fell $1.51 to $12.11 in afternoon trade on the New York Stock Exchange. Shares are down more than 80 percent in the last 12 months.

Hartford Insurance Becomes a Savings and Loan and Taps Uncle Sugar's CPP

There seems to be a bias to do whatever it takes to support big bonus and dividend paying financial companies, even one as diverse as GE, but to continue to let the manufacturing sector and blue collar jobs go to hell in a handbasket for the sake of global competitiveness and lower wages.

Yesterday the talking heads on Bloomberg and CNBC were ripping US manufacturing for its bad management practices, and blue collar workers for their extravagant wages, while praising the use of public money to generously subsidize the financial sector that caused this mess.

It was a truly Orwellian moment. What a collection of shameless, self-serving parasites!

Hartford's stock jumped 25% on the news, and helped to buoy the market. This did not last as the markets sold off heavily in the last half of hour trading. This Administration's economic policies are as bankrupt as they have left the Treasury.

The Hartford Announces Agreement To Acquire Federal Trust Bank
And Application To U.S. Treasury Capital Purchase Program
Friday November 14, 3:20 pm ET

HARTFORD, Conn. - The Hartford Financial Services Group, Inc. (NYSE: HIG) today announced that it has applied to the Office of Thrift Supervision (OTS) to become a savings and loan holding company and has applied to participate in the U.S. Treasury Department’s Capital Purchase Program (CPP).

In conjunction with these applications, The Hartford has signed a merger agreement to acquire the parent company of Federal Trust Bank for approximately $10 million and will also provide an additional amount to recapitalize the bank. Federal Trust Bank, a federally chartered, FDIC-insured savings bank is owned by Federal Trust Corporation, a unitary thrift holding company headquartered in Sanford, Fla. The completion of this acquisition will satisfy a key eligibility requirement for participation in CPP.

“We are taking these actions as a strong and well-capitalized financial institution looking for maximum flexibility and stability,” said Ramani Ayer, The Hartford’s chairman and chief executive officer. “Securing capital at the terms available through the Capital Purchase Program could be a prudent course in this market environment and would allow us to further supplement our existing capital resources.”

The Hartford’s purchase of Federal Trust Corporation is contingent on Treasury’s approval of The Hartford’s participation in the CPP, approval of the acquisition by the shareholders of Federal Trust Corporation, and the Office of Thrift Supervision’s approval of The Hartford’s application to become a savings and loan holding company. The Hartford estimates that it would be eligible for a capital purchase of between $1.1 billion and $3.4 billion under existing Treasury guidelines. The final amount of capital request will be determined following approval by Treasury.

About Federal Trust Corporation

Federal Trust Corporation is a unitary thrift holding company and is the parent company of Federal Trust Bank, a federally-chartered, FDIC-insured savings bank. Federal Trust Bank operates 11 full-service offices in Seminole, Orange, Volusia, Lake and Flagler Counties, Florida. The company's executive and administrative offices are located in Sanford, in Seminole County, Florida.