(Dow Jones) The Hartford Financial Services Group said Monday it will sell an annuities operation that it has been winding down since 2012 to a group of investors, helping close the door on a painful chapter in the 207-year history of Hartford.
The Connecticut-based insurer created the business, Talcott Resolution, several years after the 2008-09 financial crisis to house a business that had made it one of the hardest-hit US life insurers during the market’s steep slide. As a “run-off” business, Talcott services existing insurance contracts but doesn’t sell new products.
Hartford said it will receive total consideration of about $2.05bn, which includes $1.4bn in cash, a 9.7% stake in the new company, transferred debt and a pre-closing dividend. Hartford expects to book around a $3.2bn after-tax net loss in the fourth quarter because of the deal’s structure.
The investors buying Talcott include Cornell Capital, Atlas Merchant Capital, TRB Advisors, Global Atlantic Financial Group, Pine Brook and J. Safra Group, Hartford said.
Variable annuities put Hartford at disadvantage
At the heart of Talcott is a retirement-savings product called a variable annuity. Hartford had helped turn the product into an industrywide hot seller in the early to mid-2000s with innovative income-stream guarantees. Variable annuities are a tax-advantaged form of investing in stock and bond funds. If the funds perform poorly, the guarantees kick in, sometimes providing lifetime income.
Hartford had so many guarantees on its books when markets slid in 2008 that it had to take $3.4bn in US government aid to help meet regulatory requirements for backing up its obligations to contract holders. It was one of just three US insurers to take the federal assistance; all have fully repaid the government.
Hartford quit selling the annuities in 2012 after retooling the product to seek to make it less risky to the insurer, while still attractive to consumers. At the time, it decided to focus more heavily on other operations, including its property-casualty, group-benefits and mutual-funds businesses.