6th December 2017

The Hartford enters definitive agreement to sell run-off life and annuity businesses

The Hartford has entered into a definitive agreement to sell Talcott Resolution, its run-off life and annuity businesses, to a group of investors led by Cornell Capital, Atlas Merchant Capital, TRB Advisors, Global Atlantic Financial Group, Pine Brook and J. Safra Group. Total consideration to The Hartford is $2.05bn, comprised of cash from the investor group, a pre-closing cash dividend, debt included as part of the sale, and a 9.7% ownership interest in the acquiring company. The total consideration amount does not include $1.4bn in dividends previously paid by Talcott Resolution in 2017. The sale is anticipated to close in the first half of 2018, subject to regulatory approval and other closing conditions.
“I am pleased to announce that we have reached an agreement to sell Talcott Resolution for total value to shareholders of approximately $3bn, including the carrying value of retained tax benefits,” said The Hartford’s chairman and ceo Christopher Swift. “After a thorough and robust process, we concluded that this transaction is the best path forward. It will complete our exit from the run-off life and annuity businesses and strengthen our focus on growing our market-leading Property and Casualty, Group Benefits and Mutual Funds businesses. In addition, we will receive an equity interest in the acquiring company which will enable us to participate in Talcott Resolution’s continued success. We also expect the sale will improve our future ROE and earnings growth profile and enhance the company’s financial flexibility.”
Under the terms of the sale agreement and subject to regulatory approval, the investor group will form a new company that will purchase Hartford Life(HLI), the holding company for the Talcott Resolution operating subsidiaries, for a net payment of $1.443bn in cash. The Hartford will receive a 9.7% ownership interest, valued at $164m, in the new company. Subject to regulatory approval, The Hartford also expects to receive $300m in a pre-closing dividend from Talcott Resolution and will reduce its long-term debt by $143m because debt issued by HLI will be included as part of the sale. In addition, The Hartford will retain Talcott Resolution tax benefits with an estimated GAAP book value of $950m, which will be available for realization subject to the level and timing of The Hartford’s taxable income. As a result of The Hartford’s election to retain certain tax benefits, the company will not recognize a tax capital loss on the sale. Based on the terms of the sale and the retention of the tax attributes, The Hartford estimates that the sale will result in a GAAP net loss of approximately $3.2bn, after tax, which would be recorded in discontinued operations in fourth quarter 2017.1 The estimated loss on sale and the estimated retained tax benefits and our ability to realize such benefits are based on current tax law and are subject to a final determination of the tax basis of the operations sold. Beginning in fourth quarter 2017 and continuing until closing of the transaction, the results of operations of Talcott Resolution will be reported as discontinued operations for all periods presented in The Hartford’s financial statements.
The Hartford’s cfo Beth Bombara, added, “We believe that this transaction provides an excellent outcome for shareholders, although it results in a GAAP loss. It accelerates the return of capital from Talcott Resolution compared with the gradual run-off of the business. We are evaluating opportunities to deploy proceeds from the sale and currently expect to use approximately $400m for additional debt repayment, on top of the $500m we previously announced we would repay in 2018.”

The Hartford Trends(224 articles)