Lincoln National, Hartford Financial Services shares down after US announces warrant auction

Lincoln National, Hartford fall on warrant auction

NEW YORK — Shares of Lincoln National Corp. and Hartford Financial Services Group Inc. fell Tuesday, after the U.S. government said it will auction warrants from the two insurance companies in the next several weeks.

THE SPARK: The Treasury Department said it will auction 52.09 million warrants of Hartford, Conn.-based Hartford Financial and 13.05 million warrants of Radnor, Pa.-based Lincoln National. A warrant gives the purchaser the right to buy common stock at a fixed price, in these cases at steep discounts. The entry of more shares into the market is seen as diluting the value of current shareholders’ stakes.

THE BIG PICTURE: The government received the warrants in exchange for providing the life insurance companies with billions in support in the spring of 2009 to help prop them up after the market crash drained their cash reserves.

Hartford Financial received $3.4 billion in support from the government’s $700 billion bailout fund, the Troubled Asset Relief Program, in June 2009. It repaid the aid on March 31 of this year.

Lincoln National received $950 million from TARP in July 2009, and repaid the government on June 30. The sales will sever the remaining ties the two insurance companies have to the bailout fund.

THE ANALYSIS: The warrants equal the right to buy shares of Hartford Financial at $9.79 per share, a 57 percent discount from their closing price Friday. For Lincoln National, the warrants offer purchase rights at $10.92 per share, a 58 percent discount.

SHARE ACTION: Hartford Financial shares dropped 86 cents, or 3.8 percent, to $21.66 in afternoon trading. The stock, which flirted with $100 in late 2007, has traded between $18.81 and $30.46 in the past 52 weeks, and started the session down 3 percent for 2010.

Lincoln National shares fell $1.18, or 4.5 percent, to $24.90 in afternoon trading. The stock, which traded above $69 prior to the crisis, has changed hands between $20.65 and $33.55 in the past 52 weeks, and started the session up 4.9 percent for the year.