Financial Services Group Inc.
) started the New Year by announcing the closure of three
previously announced divestitures. The company has completed the
sale of its Retirement Plans business to Massachusetts Mutual
Life Insurance Company, Individual Life Insurance business to
Prudential Financial Inc.
) and Individual Annuity new business facilities to Forethought
Financial Group Inc.
The divestitures are not expected to significantly affect
Hartford's reported net income. However, the company expects to
record a small amount of capital loss in the fourth quarter of
2012 and a modest amount of capital gain in the first quarter of
2013 due to the transactions.
Moreover, the three transactions are expected to result in a
net statutory capital benefit of almost $2.2 billion for
Hartford, driven by an increase in the U.S. life statutory
surplus and a decline in the U.S. life risk-based capital
requirements. However, most of the net statutory capital benefit
will accrue from the divestiture of the Retirement Plans
business, completed on January 1, and Individual Life business,
completed on January 2. As the sale of these businesses was
completed in January 2013, the benefit will be reflected in the
financial results of the first quarter of 2013.
Hartford believes that these divestitures will help the
company boost profitability and improve its returns to
shareholders. Moreover, the capital benefits due to the
transactions have enhanced the financial flexibility of the
Hartford had announced the plan to divest its Individual Life
and Retirement Plans businesses, along with subsidiary Woodbury
Financial Services Inc. in March 2012. The company also
terminated its Individual Annuity business in April 2012.
In the same month, Hartford announced the agreement with
Houston-based Forethought to sell its Individual Annuity new
business facilities, including the product management,
distribution and marketing units, and all the Individual Annuity
products it used to sell. Thereafter, in July 2012, the company
announced the deal to sell Woodbury toSunAmerica Financial Group,
Inc., a subsidiary of
American International Group Inc.
). This divestiture was closed in December last year.
Further, in September 2012, Hartford announced the agreements
to sell its Retirement Plans business and Individual Life
These efforts will increase Hartford's focus on its Property
and Casualty, Mutual Funds and Group Benefits segments, which not
only generate strong revenues, but also have an admirable market
Following the news of the closure of these divestitures,
credit rating agency A.M. Best Co. placed the ratings of Hartford
and its property and casualty insurance subsidiaries under review
with developing implications. The rating agency also placed the
ratings of the company's life insurance subsidiaries under review
with negative implications.
Currently, Hartford, Prudential Financial and AIG carry a
short-term Zacks #3 Rank (Hold). We maintain a long-term
'Underperform' recommendation on Hartford and 'Neutral'
recommendation on AIG and Prudential Financial.
AMER INTL GRP (AIG): Free Stock Analysis
HARTFORD FIN SV (HIG): Free Stock Analysis
PRUDENTIAL FINL (PRU): Free Stock Analysis
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