- Total consideration to The Hartford of
$2.05 billion, comprised of cash, a pre-closing dividend,
transferred debt, and a 9.7 percent ownership interest in the
acquiring company
- The Hartford also will retain an
estimated $950 million of Talcott Resolution tax benefits
- The acquiring investor group, with deep
experience in insurance industry, poised to operate the Talcott
Resolution franchise as a standalone company
The Hartford has entered into a definitive agreement to sell
Talcott Resolution, its run-off life and annuity businesses, to a
group of investors led by Cornell Capital LLC, Atlas Merchant
Capital LLC, TRB Advisors LP, Global Atlantic Financial Group, Pine
Brook and J. Safra Group. Total consideration to The Hartford is
$2.05 billion, comprised of cash from the investor group, a
pre-closing cash dividend, debt included as part of the sale, and a
9.7 percent ownership interest in the acquiring company. The total
consideration amount does not include $1.4 billion in dividends
previously paid by Talcott Resolution in 2017. The sale is
anticipated to close in the first half of 2018, subject to
regulatory approval and other closing conditions.
“I am pleased to announce that we have reached an agreement to
sell Talcott Resolution for total value to shareholders of
approximately $3 billion, including the carrying value of retained
tax benefits,” said The Hartford’s Chairman and CEO Christopher
Swift. “After a thorough and robust process, we concluded that this
transaction is the best path forward. It will complete our exit
from the run-off life and annuity businesses and strengthen our
focus on growing our market-leading Property and Casualty, Group
Benefits and Mutual Funds businesses. In addition, we will receive
an equity interest in the acquiring company which will enable us to
participate in Talcott Resolution’s continued success. We also
expect the sale will improve our future ROE and earnings growth
profile and enhance the company’s financial flexibility.”
Under the terms of the sale agreement and subject to regulatory
approval, the investor group will form a new company that will
purchase Hartford Life, Inc. (HLI), the holding company for the
Talcott Resolution operating subsidiaries, for a net payment of
$1.443 billion in cash. The Hartford will receive a 9.7 percent
ownership interest, valued at $164 million, in the new company.
Subject to regulatory approval, The Hartford also expects to
receive $300 million in a pre-closing dividend from Talcott
Resolution and will reduce its long-term debt by $143 million
because debt issued by HLI will be included as part of the sale. In
addition, The Hartford will retain Talcott Resolution tax benefits
with an estimated GAAP book value of $950 million, which will be
available for realization subject to the level and timing of The
Hartford’s taxable income. As a result of The Hartford’s election
to retain certain tax benefits, the company will not recognize a
tax capital loss on the sale. Based on the terms of the sale and
the retention of the tax attributes, The Hartford estimates that
the sale will result in a GAAP net loss of approximately $3.2
billion, after tax, which would be recorded in discontinued
operations in fourth quarter 2017.1 The estimated loss on sale and
the estimated retained tax benefits and our ability to realize such
benefits are based on current tax law and are subject to a final
determination of the tax basis of the operations sold. Beginning in
fourth quarter 2017 and continuing until closing of the
transaction, the results of operations of Talcott Resolution will
be reported as discontinued operations for all periods presented in
The Hartford’s financial statements.
The Hartford’s Chief Financial Officer Beth Bombara said, “We
believe that this transaction provides an excellent outcome for
shareholders, although it results in a GAAP loss. It accelerates
the return of capital from Talcott Resolution compared with the
gradual run-off of the business. We are evaluating opportunities to
deploy proceeds from the sale and currently expect to use
approximately $400 million for additional debt repayment, on top of
the $500 million we previously announced we would repay in
2018.”
Prior to the closing of the transaction, the company’s Group
Benefits and Mutual Funds subsidiaries, which are currently
subsidiaries of HLI, will be transferred to another Hartford
subsidiary and will not be part of the transaction. In addition,
immediately after closing, Talcott Resolution will reinsure a
portion of its fixed annuity, payout annuity and structured
settlement businesses to a subsidiary of Global Atlantic Financial
Group (Global Atlantic). Following the sale, Hartford Investment
Management Company (HIMCO), The Hartford’s investment management
group, will continue to manage a significant majority of Talcott
Resolution’s investment assets for an initial 5-year term. HIMCO
also will be retained by Global Atlantic to manage certain assets
associated with the post-closing reinsurance agreement.
As part of the transaction, about 400 Hartford employees will
become employees of the new company and will be located at offices
currently owned or leased by The Hartford in Windsor, Connecticut,
and Woodbury, Minnesota. Swift added, “We are proud of the
reputation, operational capabilities and talented employees of
Talcott Resolution, all of which provide the buyer with a great
foundation on which to build its U.S. life insurance and annuity
presence, while providing continuity for Talcott Resolution’s
policyholders, partners and employees.”
The Hartford will host a conference call to discuss the sale at
9:00 a.m. EST on Dec. 4, 2017. The call can be accessed via a live
listen-only webcast or as a replay through the investor relations
section of The Hartford's website at https://ir.thehartford.com. A
replay of the call along with a transcript of the event will be
available for at least one year.
The Hartford’s financial advisors for the transaction are J.P.
Morgan Securities LLC and Goldman Sachs & Co. LLC and the
company’s legal advisor is Sidley Austin LLP. The financial advisor
for the investor group is BofA Merrill Lynch.
Additional information regarding the transaction can be found on
The Hartford's website at https://ir.thehartford.com and in a
Current Report on Form 8-K filed today with the Securities and
Exchange Commission.
About The Hartford
The Hartford is a leader in property and casualty insurance,
group benefits and mutual funds. With more than 200 years of
expertise, The Hartford is widely recognized for its service
excellence, sustainability practices, trust and integrity. More
information on the company and its financial performance is
available at https://www.thehartford.com. Follow us on Twitter
at www.twitter.com/TheHartford_PR.
The Hartford Financial Services Group, Inc., (NYSE: HIG)
operates through its subsidiaries under the brand name, The
Hartford, and is headquartered in Hartford, Conn. For additional
details, please read The Hartford’s legal notice.
HIG-F
Some of the statements in this release may be considered
forward-looking statements as defined in the Private Securities
Litigation Reform Act of 1995. These forward-looking statements
include statements relating to the financial impact of the sale of
Talcott Resolution, including, without limitation, the impact of
the sale on The Hartford’s future ROE and earnings growth profile,
the estimated net loss on sale and retained tax benefits, the use
of sale proceeds, the utilization of deferred tax assets, and the
timing of closing the transaction, and are based on current law,
expectations and assumptions. We caution investors that these
forward-looking statements are not guarantees of future
performance, and actual results may differ materially. Investors
should consider the important risks and uncertainties that may
cause actual results to differ. These important risks and
uncertainties include risks that the anticipated benefits of the
transaction and the GAAP loss resulting from the transaction could
differ materially from the description and estimates set forth in
this release. In addition, tax reform could materially change the
estimated retained tax benefits described above. Additional risks
and uncertainties include those discussed in our 2016 Annual Report
on Form 10-K, subsequent Quarterly Reports on Forms 10-Q, and the
other filings we make with the Securities and Exchange Commission.
We assume no obligation to update this release, which speaks as of
the date issued. From time to time, The Hartford may use its
website to disseminate material company information. Financial and
other important information regarding The Hartford is routinely
accessible through and posted on our website at
https://ir.thehartford.com. In addition, you may automatically
receive email alerts and other information about The Hartford when
you enroll your email address by visiting the “Email Alerts”
section at https://ir.thehartford.com.
1 At closing, shareholders’ equity will be further reduced for
the amount of accumulated other comprehensive income (AOCI) of the
Talcott Resolution business, which was $931 million as of Sept. 30,
2017, or $2.56 of book value per diluted share. Talcott
Resolution’s AOCI largely consists of net unrealized gains on
investments.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171204005428/en/
The Hartford Media Contact:Michelle Loxton,
860-547-7413michelle.loxton@thehartford.comorThe Hartford
Investor Contact:Sabra Purtill,
860-547-8691CFAsabra.purtill@thehartford.comorInvestor Group
Media Contacts:Jon Keehner,
212-355-4449jkeehner@joelefrank.comorJulie Oakes,
212-355-4449joakes@joelefrank.com
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