Hartford Financial Services Group Inc. (HIG) said it will sell its lending unit at loss, two years after acquiring the company to qualify for a government bailout.
The insurer will record an after-tax charge of about $70 million this quarter in connection with the sale of Federal Trust Corp. to CenterState Banks Inc. (CSFL), according to a statement today from Hartford, which is based in the Connecticut city of the same name.
Hartford purchased the lender in order to qualify for aid under Treasury’s Troubled Asset Relief Program. The insurer, under then-Chief Executive Officer Ramani Ayer, paid $10 million in cash for Federal Trust in June 2009 and promised to provide the lender with $100 million of capital. Ayer’s replacement, Liam McGee, has repaid the $3.4 billion TARP rescue and sold a claims-management unit and a Canadian mutual fund business.
The bank deal is “consistent with Hartford’s other recent sales of non-core operations,” the insurer said in the statement.
The sale is expected to be completed in the fourth quarter, and the charge will include losses on assets and liabilities of Federal Trust that won’t be transferred to CenterState, the insurer said. Federal Trust has 11 offices in Florida.
Insurers needed status as lenders to qualify for aid under the TARP program that was designed to prop-up the financial system. Lincoln National Corp. (LNC), which also repaid its bailout funds, had acquired a lender with about $7 million of assets. American International Group Inc., the insurer that hasn’t yet repaid Treasury, owned a lender before its rescue.
Hartford dropped 55 cents, or 2 percent, to $26.54 in New York Stock Exchange composite trading at 4:15 p.m. CenterState, based in Davenport, Florida, climbed 38 cents, or 6.6 percent, to $6.17 on the Nasdaq Stock Market.
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