Hartford Financial Services Group, Inc. (HIG) announced a definitive agreement to divest its subsidiary – Hartford Life International Limited – to Berkshire Hathaway Inc.’s (BRK.A) (BRK.B) subsidiary – Columbia Insurance Company. The cash transaction is priced at $285 million.
The purchase consideration is almost equal to the statutory surplus, as of Mar 31, 2013, of Hartford Life Limited – a subsidiary of Hartford Life International – calculated as per the Irish accounting standards. Dublin-based Hartford Life used to sell variable annuities in the U.K. between 2005 and 2009. It will be the only asset of Hartford Life International at the time of closure of the deal, which is expected to be around the end of 2013.
The divestiture is subject to regulatory approval and customary closing conditions. Hartford Financial will likely witness a $150 million decline in the U.S. statutory capital due to the deal in the second quarter of 2013. Moreover, the company is expected to generate post-tax reported net loss of $110 million in the same quarter.
Hartford Financial terminated its Individual Annuity business in 2012 and sold its new variable annuity business infrastructure in Jan 2013, which is expected to cut down pre-tax expenses by $100 million in 2013. The company’s entire U.S. Annuity as well as International Annuity business is in the Talcott Resolution segment, which covers the runoff and sold businesses.
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. This divestiture is expected to help toward the same and be beneficial for the company despite the negative impact in the second quarter of 2013.
Hartford Financial carries a Zacks Rank #3 (Hold). Other multi-line insurance companies worth considering are Eastern Insurance Holdings, Inc. (EIHI) and Enstar Group Limited (ESGR). Both these companies carry a Zacks Rank #1 (Strong Buy).
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