The Hartford Financial Services Group, Inc. is the latest big U.S. financial seeking to raise capital. Hartford announced Monday a binding agreement with Allianz SE, which provides for a US$2.5 billion capital investment.

Allianz will purchase, at US$31 per share, US$750 million of preferred shares convertible to common stock after receipt of applicable approvals, and US$1.75 billion of 10% junior subordinated debentures. The debentures are callable by The Hartford at par beginning ten years after issuance.

Allianz SE will also receive warrants that entitle it to purchase US$1.75 billion of common stock at an exercise price of US$25.32 per share, subject to shareholder approvals. The warrants expire in seven years.

In addition, the company said it expects a net loss for the third quarter in the range of US$8.50 to US$8.80 per share, including net realized capital losses in the range of US$7.05 to US$7.25 per share, or approximately US$2.1 billion to US$2.2 billion.

The vast majority of the realized capital losses are impairments on The Hartford’s investment portfolio, it explained. About 75% of the impairments are related to investments in the financial services sector, which were negatively affected by recent market turmoil, it added.

Hartford’s chairman and chief executive officer Ramani Ayer, said, “We are taking decisive action to ensure that The Hartford remains well capitalized for long-term success. This investment strengthens our ability to weather volatile markets and continue to invest and vigorously compete in our businesses. We are dedicated to honoring our commitments to customers.”

“We believe in the fundamental strength of the U.S. economy and its insurance industry and respect The Hartford as a great insurance brand,” said Michael Diekmann, chairman of the board of management and CEO of Allianz. “We anticipate a favourable return on our investment.”

At the same time, Hartford said that effective immediately, Greg McGreevey, who joined the company in August, will assume the position of executive vice president and chief investment officer for The Hartford and president of Hartford Investment Management Company. He succeeds Dave Znamierowski who is leaving the company.

“Dave served The Hartford with dedication for the past 12 years. Given the recent unprecedented turmoil in the financial markets and its effect on the company’s investment portfolio, we agreed that it would be best to bring a fresh perspective to our investment operations,” added Ayer.