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NEW YORK (
The Hartford(HIG - Get Report) is selling off a thrift it bought to qualify for a bailout as more insurers unload the remnants of the 2008 financial crisis.
Hartford announced Monday that it would sell its Federal Trust Corp. unit to
CenterState Banks(CSFL - Get Report).
Both CenterState and Hartford declined to comment on the terms of the deal, although the insurer confirmed it will record an after-tax charge of $70 million in the second quarter related to the divestiture.
Federal Trust, which has $2.2 billion in assets, was acquired in June 2009 to help The Hartford get a $3.4 billion bailout from the Troubled Asset Relief Program from the U.S. Treasury Deparment. The Hartford repaid the Treasury in March 2010.
"Basically they acquired the bank to get TARP," said Edward Shields, an analyst at Sandler O'Neill. "It's not core to their business and they have been looking to raise capital."
The Hartford has been gradually selling off non-core operations such as its mutual fund business in Canada and wholly owned subsidiary Specialty Risk Services, which were both sold in 2010. The insurer has also been rumored to putting its mutual fund business on the block in order to quell investors' worried about losses in its
variable annuity business in Japan, but would not confirm reports.
The Hartford is the second bank to recently divest banking assets.
Allstate(ALL - Get Report) sold its bank to Discover Financial Services in February for an undisclosed amount.
Many experts believe that other insurers are likely to sell off any thrifts they own prior to July when The Office of the Comptroller of Currency (OCC) assumes the duties of the Office of Thrift Supervision and the
Federal Reserve will oversee the compliance of insurers with thrifts. Those insurers that continue to operate thrifts past the July transition need to make sure they are in compliance with the Collins Amendment, the Volcker Rule and they may be put on the list of those institutions that are systemically important (SIFIs).
"We expect there will be a lot of interest in restructuring and shedding these thrifts to avoid oversight," said Howard Mills, former superintendent of the New York State Insurance Department and chief advisor with
Deloitte LLP's insurance industry group told its
TheStreet earlier. "We think the reporting requirements would be costly for these insurers."
For a list of other insurers that own banks click on the image below.