Allianz invests $2.5B in Hartford; dividend is cut

USA Today
October 6, 2008

HARTFORD, Conn. (AP) — Hartford Financial Services Group (HIG) said Monday that it will receive a $2.5 billion investment from financial services giant Allianz (AZ)

Hartford Financial also predicted a steep third-quarter loss, and said it is cutting its dividend in conjunction with the investment by Allianz.

Allianz will buy $750 million in preferred stock at $31 a share convertible to common stock. The German firm will also buy $1.75 billion of 10% junior subordinated debentures.

Hartford Financial also provided Allianz with warrants to buy an additional $1.75 billion in common stock at $25.32 per share. The warrants expire in seven years.

Shares of Hartford Financial closed Friday at $27.40.

"This investment strengthens our ability to weather volatile markets and continue to invest and vigorously compete in our businesses," Ramani Ayer, Hartford Financial's chairman and chief executive, said.


The investment comes as Hartford Financial expects to record a third-quarter loss of $8.50 to $8.80 per share, mostly due to losses in its investment portfolio.

The insurance and financial service firm expects to take realized capital losses of $7.05 to $7.25 per share, or about $2.1 billion to $2.2 billion. About three-quarters of that charge is tied to investments in the financial services sector, which has been hit hard by the credit crisis.

Hartford Financial will also take a charge of $3.05 per share, or $915 million, related to the revision of its estimates of future gross profits, known as a DAC unlock.

Core earnings per share, which excludes the DAC unlock and investment losses, are expected to range from $1.50 to $1.60 per share, the company said.

Analysts polled by Thomson Reuters, on average, forecast earnings of 71 cents per share. Analysts estimates do not always include special items.

In conjunction with the investment by Allianz and the increase in outstanding shares, Hartford Financial said it will slash its quarterly dividend to 32 cents per share. The firm previously paid a dividend of 53 cents per share.

Copyright 2008 The Associated Press.
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