- Total consideration to The Hartford of $2.05 billion, comprised of cash, a pre-closing dividend, transferred debt, and a 9.7 percent ownership interest in the acquiring company
- The Hartford also will retain an estimated $950 million of Talcott Resolution tax benefits
- The acquiring investor group, with deep experience in insurance industry, poised to operate the Talcott Resolution franchise as a standalone company
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 LLC, Atlas Merchant Capital LLC, TRB
Advisors LP, Global Atlantic Financial Group, Pine Brook and J. Safra
Group. 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, 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 $3
billion, 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, Inc. (HLI), the holding company for the Talcott
Resolution operating subsidiaries, for a net payment of $1.443 billion
in cash. The Hartford will receive a 9.7 percent ownership interest,
valued at $164 million, in the new company. Subject to regulatory
approval, The Hartford also expects to receive $300 million in a
pre-closing dividend from Talcott Resolution and will reduce its
long-term debt by $143 million 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
$950 million, 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 $3.2 billion, 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 Chief Financial Officer Beth Bombara said, “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 $400 million for
additional debt repayment, on top of the $500 million we previously
announced we would repay in 2018.”
Prior to the closing of the transaction, the company’s Group Benefits
and Mutual Funds subsidiaries, which are currently subsidiaries of HLI,
will be transferred to another Hartford subsidiary and will not be part
of the transaction. 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 (Global Atlantic). Following the sale, Hartford
Investment Management Company (HIMCO), The Hartford’s investment
management group, will continue to manage a significant majority of
Talcott Resolution’s investment assets for an initial 5-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. Swift added, “We are proud of the reputation, operational
capabilities and talented employees of Talcott Resolution, all of which
provide the buyer with a great foundation on which to build its U.S.
life insurance and annuity presence, while providing continuity for
Talcott Resolution’s policyholders, partners and employees.”
The Hartford will host a conference call to discuss the sale at 9:00
a.m. EST on Dec. 4, 2017. The call can be accessed via a live
listen-only webcast or as a replay through the investor relations
section of The Hartford's website at https://ir.thehartford.com.
A replay of the call along with a transcript of the event will be
available for at least one year.
The Hartford’s financial advisors for the transaction are J.P. Morgan
Securities LLC and Goldman Sachs & Co. LLC and the company’s legal
advisor is Sidley Austin LLP. The financial advisor for the investor
group is BofA Merrill Lynch.
Additional information regarding the transaction can be found on The
Hartford's website at https://ir.thehartford.com
and in a Current Report on Form 8-K filed today with the Securities and
Exchange Commission.
About The Hartford
The Hartford is a leader in property and casualty insurance, group
benefits and mutual funds. With more than 200 years of expertise, The
Hartford is widely recognized for its service excellence, sustainability
practices, trust and integrity. More information on the company and its
financial performance is available at https://www.thehartford.com.
Follow us on Twitter at www.twitter.com/TheHartford_PR.
The Hartford Financial Services Group, Inc., (NYSE: HIG) operates
through its subsidiaries under the brand name, The Hartford, and is
headquartered in Hartford, Conn. For additional details, please read The
Hartford’s legal notice.
HIG-F
Some of the statements in this release may be considered forward-looking
statements as defined in the Private Securities Litigation Reform Act of
1995. These forward-looking statements include statements relating to
the financial impact of the sale of Talcott Resolution, including,
without limitation, the impact of the sale on The Hartford’s future ROE
and earnings growth profile, the estimated net loss on sale and retained
tax benefits, the use of sale proceeds, the utilization of deferred tax
assets, and the timing of closing the transaction, and are based on
current law, expectations and assumptions. 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 anticipated benefits of the transaction and the GAAP loss
resulting from the transaction could differ materially from the
description and estimates set forth in this release. In addition, tax
reform could materially change the estimated retained tax benefits
described above. Additional risks and uncertainties include those
discussed in our 2016 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 https://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 https://ir.thehartford.com.
1 At closing, shareholders’ equity will be further reduced
for the amount of accumulated other comprehensive income (AOCI) of the
Talcott Resolution business, which was $931 million as of Sept. 30,
2017, or $2.56 of book value per diluted share. Talcott Resolution’s
AOCI largely consists of net unrealized gains on investments.
