U.S. insurance group The Hartford has entered into a definitive agreement to sell run-off life and annuities business Talcott Resolution to investors led by Cornell Capital LLC, Atlas Merchant Capital LLC, TRB Advisors LP, Global Atlantic Financial Group, Pine Brook and J. Safra Group.
The sale will net The Hartford $2.05 billion, consisting of cash, a pre-closing dividend, transferred debt, and a 9.7% ownership interest in the acquiring company. The firm will also retain around $950 million of Talcott Resolution tax benefits. So overall the deal is worth close to $3 billion to the insurer.
The investor group buying the run-off specialist and its near multi-billion portfolio of legacy risks, has deep industry experienced and aims to run the Talcott Resolution franchise as a standalone company.
The deal will see the investor group forming a new company to purchase Hartford Life, Inc. (HLI), the holding company for Talcott Resolution and subsidiaries, for a net payment of $1.443 billion in cash. The Hartford will get a 9.7% ownership interest in the new company, valued at $164 million.
“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,” commented 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,” Swift continued.
The Hartford’s Chief Financial Officer Beth Bombara added, “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.”
The sale is expected to close in the first half of 2018, subject to approvals and closing conditions.