The Hartford Financial Services Group, Inc. (HIG) has been divesting some of its businesses to enhance operational efficiency. So far in 2013, The Hartford Financial has been responsible for divesting three of its businesses: the Retirement Plans business, Individual Life insurance business and its U.K. Variable Annuity Business.
On Jan 1 2013, The Hartford Financial divested its Retirement Plans business to Massachusetts Mutual Life Insurance Company for $355 million. On Jan 2, 2013, the company sold its Individual Life insurance business to Prudential Insurance Company of America for $615 million.
Last week, The Hartford Financial successfully completed the divestiture of its U.K. Variable Annuity Business, a part of its Talcott Resolution segment to Berkshire Hathaway Inc. (BRK.B). This Variable Annuity subsidiary – Hartford Life International Limited (HLIL) was sold to one of Berkshire Hathaway’s subsidiaries – Columbia Insurance Company at the scheduled time. The cash transaction was priced at $285 million, based on HLIL's financial position as of Mar 31, 2013.
Dublin-based Hartford Life Limited (HLL), a subsidiary of HLIL used to sell variable annuities in the U.K. between 2005 and 2009. It was the only asset of Hartford Life International on closing.
The deal resulted in a post-tax loss of nearly $102 million in the second quarter of 2013, lower than $110 million – estimated at the time of the announcement.
The Hartford Financial has been trying to trim down the size as well as risk of the legacy variable annuity blocks in its Talcott Resolution segment. The company has been considerably successful in doing so and the segment has attained self-sufficiency with regards to capital. The transaction should eliminate the risk and expense associated with this VA block.
Towards risk reduction in the Talcott Resolution segment of The Hartford Financial, the Japan VA block and U.S. VA block have also been contributing significantly. The surrender rates at the Japan VA block increased to 31% while that of the U.S.
VA block increased to 20% in the third quarter of 2013. The Hartford Financial is now looking forward to more such transactions that can increase the release of capital thereby making the company proficient in executing capital management plans and hence create shareholder value.
The Hartford Financial currently carries a Zacks Rank #2 (Buy). Other players in the insurance industry, which look attractive at current levels, include Kemper Corp. (KMPR) and Prudential plc (PUK). Both stocks carry a Zacks Rank #1 (Strong Buy).
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