Posted on 04 Aug 2011
Hartford Financial Services Group Inc. said its board of directors authorized a $500 million share-repurchase program, the insurer's first since it was forced to take a federal bailout during the 2008-09 financial crisis.
The buyback program was announced Wednesday, six months after Hartford doubled its common-stock dividend. The buyback indicates the company "has a strengthened balance sheet, a reduced risk profile, and we have confidence in the business moving forward," Chief Executive Liam McGee said in an interview.
While the board authorized the company to buy back the shares over three years, the company said it intends to complete the repurchase program by early next year, subject to market conditions and with an eye toward preserving its credit ratings and maintaining its capital position. With the shares trading well below the company's book value per share, a measure of assets minus liabilities, buying back stock is "a very effective use of that capital," Mr. McGee said.
Also Wednesday, Hartford posted second-quarter net income of $24 million, a 68% decline from the year-earlier period, largely because of $290 million in costs tied to natural catastrophes and $189 million set aside for mounting asbestos claims on decades-old policies. The company warned about those costs in mid-July, when it said core earnings would amount to essentially zero cents per share. Core earnings remove some investment results.
The board's buyback authorization allows Hartford to purchase both common stock and warrants. While the insurer repaid the $3.4 billion it took from the government's Trouble Asset Relied Program more than a year ago, it didn't buy back warrants it gave to the U.S. Treasury that allowed Treasury to buy about 52 million Hartford shares. Treasury sold those warrants to private investors in a secondary offering in September.