Hartford launches Nikkei 225 index-linked notes; AIG to price $10 million in CMS curve accrual notes

By Sheri Kasprzak

New York, March 30 - Hartford Life Insurance Co. led structured products news to round out the week with word that it plans to price a much-anticipated issue of principal-protected notes linked to the Nikkei 225 index.

The deal marks an expansion of Hartford's structured note activities. Previously it has only used the S&P 500 for index-linked notes.

The five-year Nikkei notes are set to price April 18.

The zero-coupon notes pay par plus any increase on the index multiplied by the participation rate, which is expected to be at least 128%. The exact participation rate will be determined at pricing.

Investors will receive at least par at maturity.

Also at Hartford, the company plans to price another issue of principal-protect notes linked to the S&P 500 index. Earlier this week, the insurer priced $242,000 in zero-coupon principal-protected notes linked to the index.

Like the Nikkei-linked notes, the new seven-year S&P notes also pay par times the increase on the index multiplied by the participation rate. The exact rate will be determined at pricing on April 18. Investors will receive at least par at maturity.

AIG's $10 million CMS notes

Another insurer, American International Group, Inc. said it plans to price a $10 million offering of CMS curve accrual notes.

The 15-year notes initially pay interest at 7% annually. After that, interest will accrue at the base rate for each day the spread of the 30-year CMS rate over the two-year CMS rate is greater than or equal to zero. The base rate will be 7% per year for April 18, 2008 through April 17, 2012, 9% per year through April 17, 2017 and 12% per year through maturity.

The notes are set to price April 18.

The deal follows a similar offering by AIG with the same structure that priced on March 12 and settled March 23. The ended up at $15 million in size, upsized from a planned $10 million amount.

Two finance-linked deals

Two reverse convertible offerings were set to price Friday in the financial services sector.

Rabo Financial Products BV was negotiating the terms of a 10% reverse convertible linked to The Charles Schwab Co.

The five-month note has an 85% knock-in level.

The note pays par at maturity unless the stock falls below the knock-in level during the life of the notes and ends below the initial share price. In that case, the notes pay a number of shares equal to $1,000 divided by the initial share price.

Also, Barclays Bank plc planned to price 9% reverse convertibles linked to Legg Mason, Inc.

Those notes pay par at maturity unless the stock falls below the 85% knock-in level during the life of the five-month notes and finishes below the initial share price. At that point, the notes pay a number of shares equal to $1,000 divided by the initial share price.

FX-linked notes losing luster?

Elsewhere in structured products, one market source said he feels issuers will be pushing fewer and fewer foreign exchange-linked offerings.

"I just feel that investors are looking at other things right now," he said. "You can't sell something all the time and expect that people will just keep buying it. They're moving their attention to other things. I'd say probably more into commodities, maybe more into global index offerings rather than FX right now."

The market source did note, however, that certain shifts in the market may spark deals from time to time.

"I'm not saying we'll never see another FX deal ever again," he said. "That would be silly. I am saying that I don't think we're going to see as many."

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