Financial Services Group has announced that it will sell an annuities operation it’s been winding down for the last five years.
The Hartford created the business, Talcott Resolution, as a home for its existing variable annuities. Variable annuities are a guaranteed form of investing in stocks and bonds. The guarantees kick in if the funds perform poorly. During the 2008 financial crisis, that caused big trouble for The Hartford, which had so many outstanding guarantees that it had to take a $3.4 billion bailout from the government.
The Hartford stopped selling the product and created Talcott to house its existing annuities. As a “run-off” business, Talcott services existing contracts, but does not sell new products, according to a report by Capital.com. The Hartford is selling the business to a group of investors including Cornell Capital, Atlas Merchant Capital, TRB Advisors, J. Safra Group, Pine Brook and Global Atlantic Financial Group.
The Hartford will receive a total of about $2.05 billion for the $100-billion book of business, according to Capital.com. That includes $1.4 billion in cash, a 9.7% stake in the new company, transferred debt and a pre-closing dividend. Still, The Hartford said it expected to post an after-tax net loss of around $3.2 billion in the fourth quarter.
Around 400 Hartford employees will move to the new company as part of the sale, Capital.com reported. The Hartford expects the deal to close in the first half of 2018.
The Hartford wasn’t the only insurer to exit the variable-annuities market in the wake of the financial meltdown. But insurers have had a difficult time offloading their annuities because of the complex guarantees and high costs. As of September, Talcott had more than $40 billion in variable annuities contracts still on the books, according to Capital.com.
The Hartford adds management liability coverage for nonprofits
Top insurers delivering big returns to shareholders