The Hartford decided to focus on its property and casualty, group benefits and mutual funds businesses, each of which has a competitive market position, strong capital generating ability and lower sensitivity to capital markets. As a result, the company is placing its Individual Annuity business into runoff and is pursuing sales or other strategic alternatives for Individual Life, Woodbury Financial Services and Retirement Plans.
“This work began in mid-2011 as part of strategy discussions. In our work we consider a broad range of factors, market dynamics, returns, capital markets sensitivity, competitive positions and The Hartford’s capital requirements,” said Liam E. McGee, chairman, president and CEO of The Hartford, during a press call. “The objective was to find the right path to deliver superior performance and greater shareholder value.”
According to a timeline provided by the company, The Hartford will conduct the sales process for Individual Life, Woodbury Financial Services and Retirement Plans during the next six months, and plans to close transactions within 12 months. During the six-month sales process, the company will continue to write new business. Individual annuity will be closed to new sales effective April 27.
Proceeds from any transactions will give The Hartford additional financial flexibility, providing opportunities to deleverage, de-risk the legacy annuity blocks, invest in the business and potentially take other capital management actions.
Christopher J. Swift, executive vice president and CFO of The Hartford, commented during the press call: “This decision to sell these businesses was very difficult. These are strong successful businesses, and we will pursue the best outcome for all stakeholders. We are at work with our investment bankers and it will take a number of months to make a definitive agreement.”
The Hartford’s Retirement Plans business has $52.3 billion in assets under management. It offers 401(k), 403(b) and 457 products. In 2011, it had $766 million in revenues. The Individual Life group has $12.4 billion of reserves separate account liabilities and had $1.4 billion in revenues in 2011.
Woodbury Financial Services has 1,400 brokers and is the 12th largest independent broker dealer in the nation. It had $250 million in 2011 revenues.
In 2012, the company expects 68% of earnings to come from the Property & Casualty Commercial market, 15% from Consumer Markets, 10% from Group Benefits and 7% from its Mutual Funds business.
“The Hartford’s sharper focus will lead to an organization that, over time, will be positioned for higher returns on equity, reduced sensitivity to capital markets, a lower cost of capital and increased financial flexibility,” said McGee. “With this portfolio and the actions we are taking, we are on the right path to unlock value and deliver superior, long-term returns for shareholders.”