A major provider of life insurance and retirement products, The Hartford Financial Services Group, has decided to become a thrift.
The Hartford has agreed to acquire the parent of Federal Trust Bank for about $10 million and to provide additional money to recapitalize the bank. At the same time, it has applied to the Office of Thrift Supervision (OTS) for approval as a savings and loan holding company.
The acquisition will satisfy a key eligibility requirement for participation in the Treasury Department’s Capital Purchase Program (CPP), explains The Hartford, which is among a number of insurance companies believed to be badly in need of capital.
Investors liked the moves, bidding up The Hartford’s shares 21 percent on Friday.
Federal Trust Bank is a federally chartered savings bank owned by Federal Trust Corp., a unitary thrift holding company based in Sanford, Florida.
“We are taking these actions as a strong and well-capitalized financial institution looking for maximum flexibility and stability,” says 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 notes that the purchase of Federal Trust is contingent on Treasury’s approval of The Hartford’s participation in the CPP, approval of the acquisition by the shareholders of Federal Trust Corp., and the OTS’s approval of The Hartford’s application to become a savings and loan holding company.
The Hartford estimates that it would be eligible to receive $1.1 billion to $3.4 billion of capital under existing Treasury guidelines. The amount requested will be determined following approval by the Treasury.