Washington — In a matter of hours Friday, four large insurance companies announced marriages with troubled thrift companies, and the Office of Thrift Supervision played the role of matchmaker, according to industry sources.
Hartford Financial Services Group Inc., Genworth Financial Inc., Lincoln National Corp., and Aegon NV—all wounded by the financial crisis—had been looking to acquire banks or thrifts so they could become thrift holding companies and, thus, be eligible to receive capital injections under the Treasury Department's Capital Purchase Program.
Sources said the insurers reached out to the OTS, which helped match them up with thrifts that might not have survived on their own.
"People called the OTS and asked about buying thrifts, and the OTS said sure," says one industry official with knowledge of the negotiations.
If the insurers are approved for Treasury funds and become thrift holding companies, they are likely to be regulated by the OTS. Observers pointed out that the gains would be significant for an agency that lost its largest customer when Washington Mutual Inc.'s thrift failed.
OTS officials did not respond to requests for comment, and the companies involved in the deals declined to discuss the agency's role.
The insurers announced the acquisitions on the last day for which financial firms could apply for a share of the $250 billion the Treasury is injecting into financial institutions.
Hartford is buying the $637 million-asset Federal Trust Corp. in Sanford, Fla. Genworth is acquiring the $895 million-asset Inter Savings Bank in Minneapolis. Lincoln has a deal for the $7 million-asset Newton County Savings Bank in Goodland, Ind., and Aegon has an agreement to acquire the $381 million-asset Suburban Federal Savings and Loan in Crofton, Md.
Federal Trust was under orders from the OTS to find a buyer by November 15. Hartford agreed to pay $1 a share, or about $10 million. The deal hinges on the insurer's approval to participate in the Capital Purchase Program. The Treasury said applicants could get infusions equal to 1% to 3% of risk-weighted assets, which in Hartford's case would be $1.1 billion to $3.4 billion.
"We are taking these actions as a strong and well-capitalized financial institution looking for maximum flexibility and stability," Ramani Ayer, Hartford's chairman and CEO, says in a press release. "Securing capital at the terms available through the Capital Purchase Program could be a prudent course in this market environment."
Dennis Ward, Federal Trust's CEO, would not discuss how the negotiations with Hartford came about, but characterized Hartford as a strong partner with access to the capital markets. "I don't look at it as just an insurance company," he says. "They're in financial services just as we are."
Ward said Hartford would inject $30 million to $50 million of capital if its deal to buy the thrift were finalized. Shannon Lapierre, a Hartford spokeswoman, said it does not intend to use the thrift to roll up other institutions.
Genworth said Sunday that it still had to negotiate a definitive agreement with Inter Savings but had reached an agreement in principle. The Richmond, Va., company is struggling with a spike in claims on mortgages that it has insured and a sharp drop in the value of its investments. Nearly $1.5 billion of the securities it holds are backed by subprime mortgages.
Suburban would be acquired by Transamerica Corp., the U.S. subsidiary of Aegon. In an e-mail, Cindy Nodorft, an Aegon spokesperson, says, "Transamerica has considered acquiring a thrift for some time, given that many companies in the U.S. insurance industry have a thrift charter to enable them to better serve the needs of customers," she writes. "Transamerica decided that this was an appropriate time to further pursue the possibility of acquiring a thrift charter due to the deadline" for applying for capital.
A number of companies have changed their corporate structures to gain access to government funds. Goldman Sachs Group and Morgan Stanley became bank holding companies in September to use liquidity facilities at the Federal Reserve Board.
Source: American Banker
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