The Hartford Financial Services Group plans to repay most of a rescue it received during the financial crisis, buying back debentures and warrants from Germany’s Allianz SE for $2.43 billion.
In early October 2008, during the deepest point of the crisis, Allianz pumped $2.5 billion into The Hartford via preferred shares, debentures and warrants. After the repurchases, Allianz will still own about 5 percent of the company, worth around $464 million.
In a statement, the insurer said the buyback — to be partly financed by issuing new debt and partly by its stock buyback program — would give it “additional financial flexibility and an improved capital structure.”
Last month, amid heavy pressure from its largest shareholder, hedge fund manager John Paulson, The Hartford said it would sell off most of its life insurance-related operations and shut down its annuity business.
Paulson has called that plan a good first step, though he continues to insist the company would be better off splitting its property insurance business from the rest of its operations, including a mutual fund unit.
The Hartford was one of three insurers to receive a U.S. government rescue during the financial crisis, and in recent times its valuation has severely lagged peers.