Filed Under:Annuities, Variable

Hartford Financial said near sale of Japan operation to Orix

Liam McGee, Chairman of Hartford Financial Services, center, opening bell ceremonies of New York Stock Exchange in 2010. (AP Photo/Richard Drew)
Liam McGee, Chairman of Hartford Financial Services, center, opening bell ceremonies of New York Stock Exchange in 2010. (AP Photo/Richard Drew)

(Bloomberg) -- Hartford Financial Services Group Inc., the insurer that’s been focusing on property-casualty coverage, is near a deal to sell Japan operations to Orix Corp., according to two people with knowledge of their talks.

The transaction would include retirement products known as variable annuities, said the people, who asked not to be identified because discussions are private. Orix would pay about $875 million, according to Nikkei, which reported on the talks earlier today.

Hartford Chief Executive Officer Liam McGee, 59, has sold a U.S. unit to Prudential Financial Inc. and added hedges to guard against currency fluctuations and stock-market declines as he seeks to limit liabilities tied to life and retirement contracts issued in prior years. He announced a deal last year to sell a U.K. variable annuity unit to Warren Buffett’s Berkshire Hathaway Inc.

“We continue to look at ways to further accelerate the runoff of the legacy annuity block and to permanently eliminate these exposures, Shannon Lapierre, a spokeswoman for the Hartford, Connecticut-based insurer, said in an e-mail today. ‘‘A transaction is one of the options we would evaluate.’’

Hartford advanced 0.9 percent to $35.25 at 4:15 p.m. in New York trading, paring its decline this year to 2.7 percent.

Lapierre said any offer would be evaluated based on the likelihood of regulators’ support and the prospect that a deal would help release capital. She declined to comment on Orix, citing company policy about market speculation. Attempts to reach Japan’s Orix for comment weren’t immediately successful.


Economic Value

John Nadel, an analyst at Sterne Agee & Leach Inc., said he expects the sale to free up at least $600 million of capital that was backing Japanese obligations. Hartford had about 305,000 variable annuity contracts outstanding in Japan as of Dec. 31, according to a document on the company’s website.

‘‘Management has consistently indicated it would sell the block only if it was able to generate something close to the true economic value of the business,” Nadel said in a research note today. “We have a high level of confidence in management to do exactly that.”

Copyright 2017 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.


The Hartford sets to transform

The company will dissolve its Vermont life-insurance captive and return approximately $300 million of surplus to the holding company.

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