Allianz S.E. is investing $2.5 billion in Hartford Financial Services Group Inc.
Allianz, Munich, Germany, will be getting warrants in Hartford, Hartford. If Allianz exercises the warrants, it would end up investing a total of $4.25 billion in Hartford and getting a 30% stake in the company, according to securities analysts at a unit of Bank of America Corp., San Francisco.
The terms of the Allianz-Hartford deal call for Allianz to pay $31 per share for $750 million in preferred shares. The preferred shares can be converted to common stock after Allianz and Hartford get the necessary approvals. Allianz also is paying $1.75 billion for 10% junior subordinated debentures, Hartford says.
Hartford can call the debentures at par beginning 10 years after issuance, Hartford says.
Allianz SE will also receive warrants which entitle it to purchase $1.75 billion of common stock at an exercise price of $25.32 per share, subject to shareholder approvals. The warrants expire in seven years.
Hartford also is:
- Taking a charge of about $2.2 billion for the third quarter, to reflect the effect of market turmoil on its investment portfolio.
“The vast majority of the realized capital losses are impairments on the Hartford’s investment portfolio,” the company says.
About 75% of the losses are associated with investments in financial services sector, Hartford says.
- Cutting its dividend to 32 cents per share, from 53 cents per share.
- Naming Greg McGreevey to succeed Dave Znamierowski as chief investment officer. Znamierowski, who has been with Hartford for 12 years, is leaving the company.
McGreevey previously worked for ING Groep N.V., Amsterdam.
“Given the recent unprecedented turmoil in the financial markets and its effect on the company’s investment portfolio, we agreed that it would be best to bring a fresh perspective to our investment operations,” Hartford Chairman Ramani Ayer says.
The price of Hartford common stock has dropped to less than $26 per share last week, from close to $100 per share earlier in the year.
The market capitalization value, or the total value of all Hartford common stock, has dropped to less than $10 billion, from a high of more than $30 billion.
Today, at press time, the price of Hartford common shares had increased about 12%, to more than $30 per share.
The Hartford share price was increasing at a time when the Dow Jones Industrial Average was down more than 5% and NASDAQ was down almost 7%.