Financial Services Group, Inc.
) announced a definitive agreement to divest its subsidiary -
Hartford Life International Limited - to
Berkshire Hathaway Inc.
) subsidiary - Columbia Insurance Company. The cash transaction
is priced at $285 million.
The purchase consideration is almost equal to the statutory
surplus, as of Mar 31, 2013, of Hartford Life Limited - a
subsidiary of Hartford Life International - calculated as per the
Irish accounting standards. Dublin-based Hartford Life used to
sell variable annuities in the U.K. between 2005 and 2009. It
will be the only asset of Hartford Life International at the time
of closure of the deal, which is expected to be around the end of
The divestiture is subject to regulatory approval and
customary closing conditions. Hartford Financial will likely
witness a $150 million decline in the U.S. statutory capital due
to the deal in the second quarter of 2013. Moreover, the company
is expected to generate post-tax reported net loss of $110
million in the same quarter.
Hartford Financial terminated its Individual Annuity business
in 2012 and sold its new variable annuity business infrastructure
in Jan 2013, which is expected to cut down pre-tax expenses by
$100 million in 2013. The company's entire U.S. Annuity as well
as International Annuity business is in the Talcott Resolution
segment, which covers the runoff and sold businesses.
Hartford Financial has been trying to trim down the size as
well as risk of the legacy variable annuity blocks in its Talcott
Resolution segment. The company has been considerably successful
in doing so and the segment has attained self-sufficiency with
regards to capital. This divestiture is expected to help toward
the same and be beneficial for the company despite the negative
impact in the second quarter of 2013.
Hartford Financial carries a Zacks Rank #3 (Hold). Other
multi-line insurance companies worth considering are
Eastern Insurance Holdings, Inc.
Enstar Group Limited
). Both these companies carry a Zacks Rank #1 (Strong Buy).
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