The Hartford is one of Fortune Magazine’s “Most Admired Companies” as well as 95th on the list of America’s largest. In 2007, it earned just under $3 billion on revenues of over $59 billion, but the company suffered a $2.6 billion loss in the third quarter. Thus, the Hartford has announced that it wants some federal bailout money:
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.
If I understand the Hartford’s press release correctly, buying a tiny financial institution for $10 million will make it eligible for up to $3.4 billion in taxpayer bailout money. The Hartford is one of a number of financial services companies–American Express is another–that have sought to classify themselves as banks so as to qualify for federal largesse. Investors apparently think it will work; Hartford’s stock price rose 21 percent on Monday.