The Hartford is testing the waters on the sale of the unit which underwrites Corporate-Owned-Life-Insurance (COLI).

Bloomberg reported on The Hartford’s plan Tuesday, saying that “people with knowledge of the matter” had said that the Hartford has “had talks” with investment banks about the issue.

Analysts at Keefe, Bruyette & Woods, Inc., in Baltimore, told National Underwriter that in its view the unit “is a key candidate for sale” as The Hartford continues its exit from the life insurance business. “It’s extremely plausible,” said Vincent DeAugustino, a KBW analyst.

For example, The Hartford just completed the sale of its United Kingdom Variable Annuity business to Columbia Insurance Co., a Berkshire Hathaway company. The Hartford sold its Hartford Life International Ltd. business for $285 million.

Shannon Lapierre, senior vice president for communications at The Hartford, said, “It’s our policy not to comment on market speculation.”

The COLI business is a unit of The Hartford’s Talcott Resolution business, the unit that The Hartford has established to manage businesses in run-off since last year. Under pressure, it agreed to divest itself of its life unit in order to concentrate on the more profitable property and casualty business.

COLI is known euphemistically as “janitor’s insurance” because it used to be sold by insurers to companies on the lives of all employees, without the employees being told. However, controversy over tax valuations and the fact that lower-level employees had not been told their lives were being insured for the benefit of the company sparked court cases and congressional outrage, prompting the industry to agree to limits on its sale — substantially throttling back sales of the product, which, industry officials said at the time, was highly profitable.

In the Pension Protection Act of 2006, industry “best practices” were codified into federal law. The COLI provision effectively limits COLI to coverage of highly compensated employees and requires the consent of insured individuals.

Bloomberg said The Hartford is estimating it will receive $200 million for the COLI unit. Bloomberg said that, according to a company presentation, the COLI unit had policies with a face value of $37 billion outstanding as of the end of March.

DeAugustino said DPW values all of Talcott’s assets at $5 billion, or $10.50 a share, and that sale of the COLI unit would not result in KBW valuing The Hartford at a higher level than currently. “It’s sale would not cause us to raise our valuation of The Hartford,” he said, explaining that the value of all Talcott assets are priced in to KBW’s current view of The Hartford’s market value.

He also said that the sale of The Hartford’s life units are continuing apace, noting that the sale of its VA business, for example, is proceeding “at a rapid rate.” The VA piece is the largest of the business in runoff, DeAugustino said.

Indeed, DeAugustino said he would “be surprised” if The Hartford was not in the process of shopping the COLI unit. However, it would have to be “at the right price,” DeAugustino said. “The Hartford is not engaging in fire sales.”

The Hartford is moving to sell its life businesses under pressure from hedge fund manager John Paulson. He pressured after The Hartford’s stock dropped in 2011 as the life business deteriorated under the pressure of a soft stock market, a core attraction for VAs, and the low interest rate environment. Bloomberg noted that The Hartford’s share price has more than doubled in the past two years, with its current market value in the $15.7 billion range.