Hartford today announced it has entered into a definitive agreement
with ORIX Life Insurance Corporation, a subsidiary of ORIX Corporation,
to sell 100 percent of the outstanding shares of Hartford Life Insurance
K.K. ("HLIKK"), The Hartford's wholly-owned Japanese annuity subsidiary.
"Today's announcement is a significant accomplishment in our efforts to
transform The Hartford and create value for shareholders," said The
Hartford's Chairman, President and CEO Liam E. McGee. "This transaction
materially reduces The Hartford's risk profile by permanently
eliminating the company's Japan variable annuity risk. We are pleased
with the economics of the transaction, both in terms of purchase price
and expected capital benefit. In addition, ORIX Life Insurance
Corporation is a financially strong, well-respected, diversified
Japanese financial services company that will continue to provide
high-quality service to our Japanese customers."
Concurrent with closing, all reinsurance agreements between HLIKK and
The Hartford's U.S. life insurance subsidiaries will terminate, with the
exception of an agreement covering about $1.1 billion of fixed payout
annuity reserves. The transaction is expected to be approved by the
Japanese Financial Services Agency and, subject to other customary
closing conditions, to close in July 2014.
The Hartford estimates that the March 31, 2014, pro forma effect of the
transaction is a U.S. GAAP loss of approximately $675 million and a U.S.
life statutory surplus loss of approximately $275 million. The company
estimates a March 31, 2014, pro forma capital benefit from this
transaction of approximately $1.4 billion. The estimated capital benefit
includes the net sales proceeds of approximately $860 million,
after-tax, and an estimated reduction in capital required in the
company's U.S. life insurance subsidiaries of approximately $540 million
due to the termination of certain reinsurance agreements.
"This transaction is another step in The Hartford's transformation which
increases the company's financial flexibility, and meaningfully
decreases our market risk and net income volatility," said The
Hartford's Chief Financial Officer Christopher J. Swift. "We will
continue to execute our current 2014-2015 capital management plan. After
closing, we will provide an update on incremental capital management
actions that we will take as a result of this transaction."
The final purchase price and associate financial impacts and capital
benefit are subject to adjustment based primarily on the effect of
changes in equity, fixed income and foreign currency market indices on
the fair value of liabilities until date of close, and could differ
materially from the estimates. Accordingly, The Hartford will continue
to hedge its Japan variable annuity risks until closing.
The expected loss on sale and the results of operations of HLIKK prior
to closing of the transaction will be reported as discontinued
operations beginning in the second quarter of 2014. As discontinued
operations, the results of operations of HLIKK will be excluded from
income from continuing operations and from core earnings, a non-GAAP
financial measure, for all periods presented in the financial statements.
HLIKK wrote annuity contracts for the Japan market from 2000 through
2009, when The Hartford placed its Japan annuity business into runoff.
As of Dec. 31, 2013, Japan account values were $23 billion for 375,000
contracts. On close of the deal, all 150 HLIKK employees in Japan will
remain employees of HLIKK.
Deutsche Bank served as financial advisor and Sidley Austin LLP served
as legal advisor to The Hartford. Additional information regarding the
transaction can be found on The Hartford's website at http://ir.thehartford.com
and in a Current Report on Form 8-K to be filed today with the
Securities and Exchange Commission.
About The Hartford
With more than 200 years of expertise, The Hartford (NYSE:HIG) is a
leader in property and casualty insurance, group benefits and mutual
funds. The company is widely recognized for its service excellence,
sustainability practices, trust and integrity. More information on the
company and its financial performance is available at www.thehartford.com.
Join us on Facebook at www.facebook.com/TheHartford.
Follow us on Twitter at www.twitter.com/TheHartford.
Some of the statements in this release may be considered forward-looking
statements as defined in the Private Securities Litigation Reform Act of
1995. We caution investors that these forward-looking statements are not
guarantees of future performance, and actual results may differ
materially. Investors should consider the important risks and
uncertainties that may cause actual results to differ. These important
risks and uncertainties include risks that the total capital benefit of
the transaction at closing and the U.S. GAAP after-tax loss and
statutory surplus loss could differ materially from the estimates set
forth in this release, as described on The Hartford's website at http://ir.thehartford.com
and in a Current Report on Form 8-K to be filed today with the SEC.
Additional risks and uncertainties include those discussed in our 2013
Annual Report on Form 10-K, subsequent Quarterly Reports on Forms 10-Q,
and the other filings we make with the Securities and Exchange
Commission. We assume no obligation to update this release, which speaks
as of the date issued.
From time to time, The Hartford may use its website to disseminate
material company information. Financial and other important information
regarding The Hartford is routinely accessible through and posted on our
website at http://ir.thehartford.com.
In addition, you may automatically receive email alerts and other
information about The Hartford when you enroll your email address by
visiting the "Email Alerts" section at http://ir.thehartford.com.
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