The Hartford has agreed to sell Talcott Resolution, its run-off life and annuity businesses, to a group of investors led by Cornell Capital LLC, Atlas Merchant Capital LLC, TRB Advisors LP, Global Atlantic Financial Group, Pine Brook and J. Safra Group.
The deal will complete the insurer’s exit from the life insurance business.
Total consideration to The Hartford is $2.05 billion, comprised of cash from the investor group, a pre-closing cash dividend, debt included as part of the sale, and a 9.7 percent ownership interest in the acquiring company. The total consideration amount does not include $1.4 billion in dividends previously paid by Talcott Resolution in 2017.
The sale is anticipated to close in the first half of 2018.
The sale does not include the company’s group benefits or mutual finds subsidiaries, which will be transferred to another Hartford subsidiary. In addition, immediately after closing, Talcott Resolution will reinsure a portion of its fixed annuity, payout annuity and structured settlement businesses to a subsidiary of Global Atlantic Financial Group.
Following the sale, Hartford Investment Management Co. (HIMCO), The Hartford’s investment management group, will continue to manage a significant majority of Talcott Resolution’s investment assets for an initial five-year term. HIMCO also will be retained by Global Atlantic to manage certain assets associated with the post-closing reinsurance agreement.
As part of the transaction, about 400 Hartford employees will become employees of the new company and will be located at offices currently owned or leased by The Hartford in Windsor, Connecticut, and Woodbury, Minnesota.
The Hartford’s Chairman and CEO Christopher Swift said the transaction will strengthen the insurer’s focus on growing its property/casualty, group benefits and mutual funds businesses. “We also expect the sale will improve our future ROE and earnings growth profile and enhance the company’s financial flexibility,” Swift said.
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 $3.2 billion, after tax, which would be recorded in discontinued operations in fourth quarter 2017.1
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 Chief Financial Officer Beth Bombara said the 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.”
She said the insurer is “evaluating opportunities” to deploy proceeds from the sale and currently expect to use approximately $400 million for additional debt repayment.