Almost six months after
Hartford Financial Services Group Inc.
) started looking for suitable divestiture opportunities for its
Individual Life and Retirement Plans segments as well as the
Woodbury Financial Services unit, the company announced an
agreement to sell the Retirement Plans business to Massachusetts
Mutual Life Insurance Company (MassMutual). The divestiture is
expected to close by the end of the year, subject to the attainment
of regulatory approval and other customary closing conditions.
Hartford will receive a cash ceding commission of $400 million
for the transaction. However, the amount is open to adjustment
before the completion of the sale.
Although the transaction is unlikely to have a material impact
on the company's results on a reported basis, it is expected to
boost the net statutory capital, including ceding commission and
lower risk-based capital requirement, by about $600 million. The
impact on the financials can be revised at the time of closure of
the transaction to include the impact of market conditions,
Hartford's results as well as other adjustments.
Following the closure of the deal, Hartford's Retirement Plans
business will be taken over by the Retirement Services Division of
MassMutual. However, the agreement allows Harford to sell new
retirement plans during the transition period. MassMutual will
cover the risks and expenses related to the new plans under a
Goldman Sachs Group Inc.
Greenhill & Co. Inc.
) are acting as Hartford's financial advisors for the deal.
The deal is an outcome of Hartford's plan, announced in March
this year, to divest its Individual Life and Retirement Plans
segments along with Woodbury Financial Services under intense
pressure from its largest shareholder, John Paulson. Woodbury is an
indirectly-held, wholly-owned retail broker-dealer subsidiary,
included in the Individual Life segment's distribution network.
Subsequently, in August, Hartford entered into a strategic
American International Group Inc.
) to sell Woodbury. The deal is expected to consummate by the end
of this year, subject to approval by regulatory bodies.
, Hartford will receive $90 million pursuant to this acquisition.
It will also receive an additional $25 million as dividend from
Currently, Hartford's shares carry a short-term Zacks #3 Rank
(Hold). Also, we maintain our long-term 'Neutral' recommendation on
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