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October 03, 2012 at 10:37 AM
Industry analysts are calling the sale of the Hartford’s individual life unit to Prudential last week a positive for the company because it will force the Hartford to concentrate on businesses where it is a dominant player.
Both Stern Agee & Leach, New York, and Moody’s issued investor notes supporting the previously-announced decision by the Hartford to exit certain life insurance markets.
John Nadel and other analysts at Sterne Agee said that the sale of its individual life business will free up roughly $1.5 billion of statutory capital, “well more than the estimated $1 billion investors were expecting.”
“Combined with two prior business sales, the Hartford should free up approximately $2.2 billion of statutory capital for deployment into share repurchases and debt repayment, with perhaps some portion earmarked for de-risking activities of its variable annuity business, Nadel said.
Moody’s analyst Stefan Kahandaliyanage explained that the Hartford Group says the sale is structured as a reinsurance transaction.
He said the $1.5 billion will include the $615 million ceding commission paid by Prudential and a reduction in required risk-based capital, based on financials as of June 30, 2012.
The company expects that the transaction, which it believes will close in early 2013, will not have a material effect on the Hartford Group’s GAAP net income.
