Taking forward its strategy of concentrating on core businesses, The Hartford Financial Services Group, Inc. (HIG - Free Report) has closed the sale of its Japanese annuity business Hartford Life Insurance K.K. (HLIKK). The company has vended the business to ORIX Life Insurance Corporation, a subsidiary of ORIX Corporation for $963 million.
The consideration comprises a purchase price of $895 million and an estimated positive purchase price adjustment of $68 million. The deal was previously announced in Apr 2014, when Hartford Financial stated that it would sell the Japanese annuity subsidiary for $895 million.
Hartford Financial continues to expect capital benefit of $1.4 billion from the transaction, out of which $1 billion will be deployed for undertaking increased capital management. However, the estimated GAAP loss on discontinued operations is $625 million and a U.S. life statutory surplus loss is approximately $325 million for the second quarter of 2014.
Notably, the latest move by Hartford Financial is a significant step in the company’s transformation into a core business focused company. This is because with the sale of HLIKK, Hartford Financial has managed to do away with most of the major non-core operations in its portfolio.
Two years back, the company had announced that it would divest its individual life and variable annuities businesses to focus on core businesses comprising Property & Casualty, Group Benefits and Mutual Funds. In consistence with this, the company vended its Retirement Plans and Individual Life Insurance businesses in Jan 2013 and its UK variable annuity (VA) business – Hartford Life International Limited (HLIL) – in Dec 2013. Apart from lowering expenses, boosting profitability and enhancing returns to shareholders, these divestitures are increasing financial flexibility by freeing up more capital.
Hartford Financial is not the only player in the industry divesting non-core operations to enhance core businesses. Recently, another insurer CNO Financial Group Inc. (CNO) divested its low return generating and volatile business Conseco Life Insurance Company (CLIC) to Wilton Reassurance Company for the same purpose.
At present, Hartford Financial carries a Zacks Rank #3 (Hold). Better-ranked players in the industry that look attractive at current levels include CNO Financial, Assurant Inc. (AIZ) and AXA Group (AXAHY). All three stocks have a Zacks Rank #2 (Buy).