Investor Group Agrees to Acquire Hartford Annuity Business

Debevoise & Plimpton is advising the 'Hopmeadow' team

(Photo: Thinkstock) (Photo: Thinkstock)

An investor group led by Cornell Capital L.L.C. has agreed to pay a total of $2.05 billion to acquire a big runoff annuity business from Hartford Financial Services Group Inc.

The group, which is identifying itself as the Hopmeadow group, is on track to acquire Hartford Life Inc. and Hartford Life & Annuity.

About 400 people who now work for Hartford Financial in Windsor, Connecticut and Woodbury, Minnesota, would go to work for the Hopmeadow group.

Hartford Financial would keep Hartford Life & Accident, the Hartford Life Inc. division that writes Hartford Financial's group disability insurance coverage.

The investor group and Hartford Financial hope to complete the deal by June 30, 2018, according to Hartford Financial. The investor group would put Talcott Resolution in a new company, and Hartford Financial would get a 9.7% stake in the new company.

(Related: Hartford Said to Enlist JPMorgan to Sell Annuity Runoff Business)

Chris Swift, the chairman of Hartford Financial, said in a statement that Hartford Financial is selling Talcott Resolution to strengthen the company's focus on its property-casualty, group benefits and operations.

"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," Swift said in a statement accompanying the deal announcement.

Cornell Capital and Hartford Financial do not seem to have given any more details about the investor group's plans for the annuity business.


The History

Ten years ago, Hartford Financial's annuity unit was a business the parent company bragged about.

The effects of the Great Recession pounded the unit's performance and increased regulatory scrutiny of the income guarantees the unit had offered. The company swung from posting $851 million in net income for the third quarter of 2007 to a $2.6 billion loss for the third quarter of 2008.

Office building windows (Image: Thinkstock)

(Image: Thinkstock)

 

Hartford Financial has been coping with the resulting shift in how regulators and rating agencies see annuity guarantees ever since. The company formed Talcott Resolution to start the process of disentangling itself from annuity obligations.

Talcott Resolution ended the third quarter with $149 billion in annuity account value still in force. The unit generated $255 million in net income during the first nine months of the year on $1.7 billion in revenue, compared with $199 million in net income on $1.7 billion in revenue for the comparable period in 2016.

The unit suffered $4.1 billion in met cash outflows, but the strong stock market pushed the value of an item described as "change in market value and other" to $4.1 billion, up from $1.8 billion for the year-earlier period.


The Buyers

Hartford Financial listed Atlas Merchant Capital L.L.C., TRB Advisors L.P., Global Atlantic Financial Group, Pine Book and J. Safra Group as companies participating with Cornell Capital in the investment group.

Hartford Financial gave a few more details in a copy of a purchase agreement filed with the U.S. Securities and Exchange Commission.

Henry Cornell signed the agreement, in his capacity as "authorized signatory," for three related companies: Hopmeadow Acquisition Inc., Hopmeadow Holdings L.P. and Hopmeadow Holdings Group L.L.C.

Hartford Financial previously owned a campus on Hopmeadow Street in Simsbury, Connecticut.

Debevoise & Plimpton L.L.P. announced that Kevin Schmidt and other lawyers at the firm are acting as Cornell Capital's legal advisors in connection with the Talcott Resolution deal.

Henry Cornell, the head of the Cornell Capital leading the investor group, is the former vice chairman of the Goldman Sachs merchant banking division. He left Goldman Sachs to start Cornell Capital in 2013. Around that time, the Financial Times ran an article describing him as one of the company's best-known dealmakers.

Another firm in the Hopmeadow group, TRB, was part of an investor group that acquired XL Group's life reinsurance business for $570 million in cash in 2014. 

Bloomberg is reporting that Cornell says the group could make more deals after it completes the Talcott Resolution acquisition.

—Read Global Atlantic Financial Unifies Annuity Distribution on ThinkAdvisor.


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