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Hartford Financial Streamlines Business With Talcott Sale


The Hartford Financial Services Group, Inc. HIG has announced that it would sell its Talcott Resolution unit 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.

The deal worth $2.05 billion also involves an equity interest of Hartford Financial in the acquiring company that would allow it to participate in Talcott Resolution’s continued success. The transaction is expected to close in the first half of 2018 and is presently subject to regulatory approvals and other closing conditions.

The company is assessing opportunities to deploy proceeds from the divesture. Presently, it expects to use around $400 million for debt repayment in addition to the $500 million it previously announced it would repay in 2018.

This divestiture would complete its exit from the life and annuity business. The Talcott Resolution unit has remained a drag for quite some time owing to lowered earnings from divested businesses and continued run-off of the annuity block. Hartford Financial decided to offload annuities in 2012 after the business took a massive hit during the financial crisis. Continuing the previous trend, in the first nine months of 2017, the unit’s core earnings declined nearly 9.5% principally due to lower Limited Partnerships income and lower fee income with the runoff of the block.

The divestiture would help the company to focus on growing market-leading core operations like Property and Casualty, Group Benefits and Mutual Funds businesses. Hartford Financial expects an improvement in its future return-on-equity, earnings performance and financial flexibility. It further expects to receive $300 million in a pre-closing dividend from Talcott Resolution that will reduce the level of its long-term debt by $143 million. However, the company estimates a GAAP after-tax net loss of about $3.2 billion from the sale of Talcott Resolution that is expected to be recorded in the fourth quarter of 2017.

Year to date, shares of Hartford Financial have gained 18.6% while the Zacks Multi Line Insurance industry rallied 11.2%. Management believes that the transaction would further instill shareholders’ confidence in the stock by boosting the company’s overall return-on-capital.

Zacks Rank & Stocks to Consider

Hartford Financial currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the industry are Radian Group Inc. RDN , MetLife, Inc. MET and Prudential Financial, Inc. PRU , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Radian Group offers mortgage and real estate products and services in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 4.52%.

MetLife offers life insurance, annuities, employee benefits and asset management products in the United States, Japan, Latin America, Asia, Europe and the Middle East. The company delivered positive surprises in each of the last four quarters with an average beat of 9.60%.

Prudential Financial provides insurance, investment management and other financial products and services in the United States and internationally. The company delivered positive surprises in three of the last four quarters with an average beat of 0.16%.

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