Hartford Closes Three Divestitures - Analyst Blog
January 04 2013 - 1:25PM
Zacks
Hartford Financial Services Group
Inc. (HIG) started the New Year by announcing the closure
of three previously announced divestitures. The company has
completed the sale of its Retirement Plans business to
Massachusetts Mutual Life Insurance Company, Individual Life
Insurance business to Prudential Financial Inc.
(PRU) and Individual Annuity new business facilities to Forethought
Financial Group Inc.
The divestitures are not expected to significantly affect
Hartford’s reported net income. However, the company expects to
record a small amount of capital loss in the fourth quarter of 2012
and a modest amount of capital gain in the first quarter of 2013
due to the transactions.
Moreover, the three transactions are expected to result in a net
statutory capital benefit of almost $2.2 billion for Hartford,
driven by an increase in the U.S. life statutory surplus and a
decline in the U.S. life risk-based capital requirements. However,
most of the net statutory capital benefit will accrue from the
divestiture of the Retirement Plans business, completed on January
1, and Individual Life business, completed on January 2. As the
sale of these businesses was completed in January 2013, the benefit
will be reflected in the financial results of the first quarter of
2013.
Hartford believes that these divestitures will help the company
boost profitability and improve its returns to shareholders.
Moreover, the capital benefits due to the transactions have
enhanced the financial flexibility of the company.
Hartford had announced the plan to divest its Individual Life
and Retirement Plans businesses, along with subsidiary Woodbury
Financial Services Inc. in March 2012. The company also terminated
its Individual Annuity business in April 2012.
In the same month, Hartford announced the agreement with
Houston-based Forethought to sell its Individual Annuity new
business facilities, including the product management, distribution
and marketing units, and all the Individual Annuity products it
used to sell. Thereafter, in July 2012, the company announced the
deal to sell Woodbury toSunAmerica Financial Group, Inc., a
subsidiary of American International Group Inc.
(AIG). This divestiture was closed in December last year.
Further, in September 2012, Hartford announced the agreements to
sell its Retirement Plans business and Individual Life Insurance
business.
These efforts will increase Hartford’s focus on its Property and
Casualty, Mutual Funds and Group Benefits segments, which not only
generate strong revenues, but also have an admirable market
standing.
Following the news of the closure of these divestitures, credit
rating agency A.M. Best Co. placed the ratings of Hartford and its
property and casualty insurance subsidiaries under review with
developing implications. The rating agency also placed the ratings
of the company's life insurance subsidiaries under review with
negative implications.
Currently, Hartford, Prudential Financial and AIG carry a
short-term Zacks #3 Rank (Hold). We maintain a long-term
‘Underperform’ recommendation on Hartford and ‘Neutral’
recommendation on AIG and Prudential Financial.
AMER INTL GRP (AIG): Free Stock Analysis Report
HARTFORD FIN SV (HIG): Free Stock Analysis Report
PRUDENTIAL FINL (PRU): Free Stock Analysis Report
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