Hartford Financial Services Group Inc. (HIG), the insurer being pressured by John Paulson to split into two companies, opted against raising its dividend after the investor said the firm should guard capital.
The quarterly payment remains 10 cents, according to a statement today from Hartford, which is based in the Connecticut city of the same name. The Bloomberg Dividend Forecast was for 13 cents a share, down from a projection of 15 cents on Feb. 1. Paulson said on a Feb. 8 conference call that Hartford Chief Executive Officer Liam McGee should spin off the property- casualty unit from life insurance.
Hartford has said “there are potential benefits to a separation,” while it also recognized there are challenges to splitting the firm, such as the allocation of parent-company debt to the units and the maintenance of credit ratings. Hartford could reduce leverage by limiting share buybacks, selling units or winding down the U.S. variable-annuities business, Paulson said in a Feb. 14 regulatory filing.
“While there may be small synergies in keeping the businesses together, the economic value of any synergies is immaterial relative to the value unlocked by a separation,” Paulson said in the filing.
McGee has cut jobs and scaled back sales of variable annuities, the retirement product that contributed to losses under his predecessor, Ramani Ayer. McGee, 57, who returned government rescue funds in 2010, announced a $500 million share repurchase program last year.
“We’re aggressively managing the levers we control, while prudently deploying capital to create shareholder value in our businesses and also return capital to shareholders through dividends and share repurchases,” McGee said at a Dec. 8 investor conference.
The dividend under Ayer was cut to 5 cents a share in 2009 from 53 cents in 2008.
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