Steve Wevodau Hartford Financial

Lincoln, Hartford may get piece of bailout

posted by Steven Wevodau

By buying thrifts, the insurance companies will become eligible.

WASHINGTON — Federal regulators will allow two large insurance companies, including Lincoln National Corp., to buy thrifts so they can qualify to receive money from the government’s financial rescue program.

The Office of Thrift Supervision, a Treasury Department agency, said Friday that it approved applications from Hartford Financial Services Group Inc. and Lincoln National Corp. to acquire existing savings and loans and become thrift holding companies.

Insurance companies that own thrifts, which are federally regulated, are eligible to apply for a piece of the $700 billion in government bailout funds.

Hartford Financial, based in Hartford, Conn., has said it expects to be eligible for between $1.1 billion and $3.4 billion in rescue money. The company previously agreed to buy Federal Trust Bank for about $10 million and to inject an undisclosed amount of new capital into the federally chartered savings bank. Federal Trust Bank, now owned by Sanford, Fla.-based Federal Trust Corp., operates 11 branches in Florida.

Philadelphia-based Lincoln National is looking to buy Newton County Loan & Savings, based in Goodland, about 30 miles northwest of Lafayette.

Shannon Lapierre, a spokeswoman for Hartford, said the company was pleased to have received the government approval. Spokesmen for Lincoln National didn’t immediately return a telephone call seeking comment Friday evening.

Hartford and Lincoln National are among four insurance companies that applied to the thrift agency in mid-November. The other two were Genworth Financial Inc. and Aegon NV, a Dutch company that owns U.S. insurer Transamerica.

Thrifts differ from banks in that, by law, they must have at least 65 percent of their lending in consumer loans such as mortgages.

Insurance companies are mostly regulated at the state level, but insurers that become thrift holding companies are under federal supervision and thereby qualify for the government bailout money.

At least two dozen insurers currently own thrifts. Many insurers have been struggling amid the financial crisis and credit crunch. Like banks and other financial institutions, some insurance companies also bought subprime mortgage securities that turned sour.

A number of property-casualty insurers have said they aren’t interested in participating in the bailout program. The industry appears to be split between life insurers, some of whom have previously expressed interest in participating in the program, and property-casualty companies.

The biggest U.S. insurance company, American International Group Inc., skirted collapse last fall when the government stepped in with a roughly $150 billion bailout package. The New York-based company was pushed to the financial brink by the huge volume of credit default swaps, instruments traded as bets against bond defaults, that it sold and by rising levels of defaulted mortgages and other debt.

Lincoln National Corp.’s headquarters was once based in Fort Wayne. The company announced it was moving its corporate offices to Philadelphia in 1998 and relocated.

The company’s financial services group, Lincoln Financial, remains in Fort Wayne.

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Monday, January 12th, 2009 Hartford Financial - Steven Wevodau, Lincoln Financial - Steven Wevodau, Lincoln National Corp. - Steven Wevodau, Steve Wevodau Press Releases Comments Off

U.S. Insurance Industry - Steve Wevodau

By Neena Mishra

 

Ongoing turmoil in the financial markets has resulted in a highly challenging environment for the U.S. insurance industry, a trend that is expected to continue in 2009. We also expect further consolidation in the industry.Life Insurers

Increased losses in the investment portfolio and lower income from the variable annuity business will continue to hurt earnings. The Industry’s statutory capital levels have fallen sharply in 2008 and some companies are trying to raise capital through the Troubled Assets Relief Program (TARP). We are not sure whether the lawmakers will allow the insurers access to TARP money. Further, many life insurers have substantial exposure to commercial-real-estate-backed securities, which will result in further losses during FY09.

Property & Casualty Insurers

Insurers’ losses from natural disasters surged in 2008, with maximum losses resulting from Hurricane Ike (insured losses of approximately $15 billion). Six named storms — Dolly, Edouard, Fay, Gustav, Hanna and Ike hit the U.S. coast this year, after two years of benign activity.

Significant catastrophe losses of 2008, coupled with decline in the investment income and sizable investment losses resulting from the ongoing turmoil in credit and equity markets, will continue to affect earnings in the coming quarters. Also, losses in the investment portfolios since the beginning of 2008 have significantly reduced the capital adequacy of most insurers. The only positive trend visible as of now is slight improvement in the insurance pricing after continued deterioration during the last couple of years.

Reinsurers

Losses from the investment portfolio of the reinsurance companies have surged during FY08. Further, during 2H08, the underwriting profits were severely hurt by the Hurricanes Ike and Gustav. However, the pricing has improved recently, which will benefit these companies during the January renewals.

Also, one of the reasons to hit profits was the increased tendency by the clients for risk retention. With insurers’ balance sheets constrained and reduced financial flexibility in the current capital markets, risk retention by primary insurers is less likely to impact growth in FY09. Reinsurers could benefit from improved pricing while losses from the investment portfolio will continue to hurt the earnings.

OPPORTUNITIES

We recently initiated coverage on Amerisafe, Inc. (NasdaqGS: AMSF - News) a specialist in providing workers compensation insurance. Since our initiation, the stock has already appreciated by about 42.5%, and we expect it to continue to outperform the market due to its sound capital position, solid investment portfolio and strong financial strength rating. We also cite its addition to S&P SmallCap 600 index after the close of trading on December 31, 2008.

We are also positive on reinsurer PartnerRe Ltd. (NYSE: PRE - News) due to its excellent underwriting abilities, strong capitalization, solid ratings and reputation in the market, which will enable it to take advantage of the stronger demand and better pricing being witnessed currently.

WEAKNESSES

We have Sell recommendations on mortgage insurer PMI Group (NYSE: PMI - News), which will remain exposed to further losses from the decline in housing values, though the demand and new business quality have improved in recent months.

Primus Guaranty (NYSE: PRS - News), a seller of credit default swaps, will face increased losses from its exposure to some of the failed/troubles institutions.

We are also bearish on Hartford Financial Services Group (NYSE: HIG - News), as we suspect that the company will face higher losses on the investment portfolio and its variable annuity business.

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Saturday, January 3rd, 2009 Other Press Releases Comments Off

HIG Surges on Raised Forecast - Steven Wevodau

By Abhishek Sarkar

Hartford Financial Services Group Inc. (NYSE: HIG - News) shares surged almost 100% after the insurance and financial services company boosted its 2008 earnings forecast.

Earlier, the insurer had slashed its forecast for this year at least twice. Hartford said that its operating businesses are performing well despite a gloomy economic environment.

The Connecticut-based company now expects earnings between $4.70 and $4.90 a share, excluding a few investment results. In October, the company was looking for a profit in the range of $4.30 to $4.50.

Hartford’s new earnings outlook for 2008 is nearly half of what it had estimated in December of the previous year. Analysts expect the company to earn $4.46 a share.

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Friday, December 5th, 2008 Other Press Releases Comments Off

Hartford Financial raises guidance, shares jump

POSTED BY STEVEN S. WEVODAU

Hartford Financial raises full-year guidance, affirms capital position; shares up sharply

HARTFORD, Conn. (AP) — Hartford Financial Services Group Inc. on Friday raised its profit expectations and reaffirmed the strength of its capital position, sending shares of the insurance company nearly 50 percent higher.

In advance of an investor meeting in New York, Hartford Financial said it now expects a profit of $4.70 to $4.90 per share for the current full year.

That’s up from the full-year profit of $4.30 to $4.50 per share that the Connecticut-based company forecast when it reported a third-quarter loss of $2.6 billion on Oct. 29.

Analysts surveyed by Thomson Reuters expect a full-year profit of $4.36 per share, on average.

Hartford Financial attributed its improved outlook to “the current market environment” as well as its expectations to release about $300 million pretax from its property and casualty insurance reserves.

Among other things, the improved outlook assumes the Standard & Poor’s 500 index ends the year at 860 — about 2 percent above Thursday’s close — and a pretax net investment loss from limited partnerships and other alternative investments of $240 million from October through December.

The raised profit forecast is still about half of the estimate that Hartford Financial issued in July, for $9.20 to $9.50 per share.

Ramani Ayer, Hartford Financial’s chairman and chief executive, sought to reassure investors about the company’s capital strength and its nearly $90 billion investment portfolio, amid concerns about the ability of insurance companies to manage risk amid volatile markets.

“The Hartford is well-capitalized and has ample liquidity,” Ayer said in a statement issued before the investor meeting.

Ayer said Hartford Financial’s statutory surplus exceeded $13 billion as of Sept. 30., and the company held more than $12 billion in cash, short-term investments and Treasury notes as of Nov. 30.

“Our property and casualty operations are capitalized at levels higher than those historically associated with an AA-level rated company,” Ayer said.

Ayer said his company’s property and casualty business “is positioned to deliver strong underwriting results in 2009.”

As for the company’s investments, Ayer said, “Under severe recession scenarios, we expect our portfolio to hold up quite well.”

Ayer said Hartford Financial was continuing to evaluate ways to reduce risk in its variable annuities business, which offers policies that have guaranteed minimum payouts or monthly withdrawal benefits. Analysts have expressed concern that the payout obligations may exceed the amount of capital the company has on hand, due to the plunge in the overall market and Hartford Financials’ own shares this year.

In midmorning trading, shares of Hartford Financial rose $3.15, or 43.7 percent, to $10.36, after earlier rising 48.1 percent. The stock traded around $70 a share as recently as mid-September, but had fallen to around $7 in recent days.

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Friday, December 5th, 2008 Other Press Releases Comments Off

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