Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards
ThinkAdvisor

Life Health > Life Insurance

The Hartford sale to Prudential seen as a positive move

X
Your article was successfully shared with the contacts you provided.

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.

“This transaction is the last of three planned business sales that will allow the Hartford Group to focus on its strategically important businesses, a credit positive,”Kahandaliyanage said.

Kahandaliyanage acknowledged in the note that the Hartford will be losing some diversity in income stream as a result of the decision to leave the individual life business.

But, he said, the move is “credit positive” because it will allow the company to focus on businesses in which it has greater scale and competitive advantages.

Kahandaliyanage said the individual life business sold to Prudential offers universal life, variable universal life, indexed universal life as well as term life and whole life insurance products through a variety of distribution channels in the U.S.

Kahandaliyanage said the business reported revenues of approximately $1.4 billion, combined general account reserves and separate account values of about $12.4 billion for 2011, and core earnings, excluding deferred amortization cost unlocking, of $129 million for the 12 months ended on 30 June, or $105 million in net income.

Kahandaliyanage said the individual life business sold to Prudential offers universal life, variable universal life, indexed universal life as well as term life and whole life insurance products through a variety of distribution channels in the U.S.

He also said the business reported revenues of approximately $1.4 billion, combined general account reserves and separate account values of about $12.4 billion for 2011, and core earnings, excluding deferred amortization cost unlocking, of $129 million for the 12 months ended on 30 June, or $105 million in net income.


NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.