What is the main purpose of the Preferred Partnership Agreement between The Hartford and Wellington?

The primary purpose of the agreement is to establish Wellington as the preferred subadviser for a substantial portion of The Hartford's mutual funds (Hartford Funds) and as a preferred partner for specific 'Covered Funds'. This arrangement aims to leverage Wellington's expertise and secure a strategic relationship for The Hartford's asset management business.

Are there any restrictions on Wellington's activities under this agreement?

Yes, Wellington has agreed to certain restrictions. These include not serving as a subadviser to certain competing 'Covered Funds' sponsored by large broker-dealers, maintaining a minimum threshold of The Hartford's assets under management subadvised by Wellington in competing funds, and not entering into new fixed-income engagements for Covered Funds before June 30, 2016. There are also restrictions on assigning portfolio managers to new non-Hartford sponsored Covered Funds.

What happens if The Hartford decides to sell its mutual fund business?

If The Hartford takes substantial steps to explore a sale of its mutual fund business, it must notify Wellington. Wellington is granted a right of first refusal to participate in the sale process, particularly in an auction or to certain entities involved in investment advising. This right is subject to customary conditions.

What is the 'make-whole payment' provision?

The 'make-whole payment' is a financial obligation The Hartford may have to Wellington if the Preferred Partnership Agreement is terminated due to a sale of The Hartford's mutual fund business or a change of control of The Hartford. It can also be triggered under specific circumstances if Wellington terminates the agreement due to a failure to meet certain fixed-income asset subadvisory targets and The Hartford breaches its obligation to recommend Wellington for those funds, followed by a subsequent sale or change of control within five years.

HIG/HIG-PG 8-K: Material Agreements

Summary

The Hartford Financial Services Group, Inc. (HIG) filed an 8-K on December 8, 2011, to announce a material definitive agreement entered into on December 5, 2011. The company, along with its subsidiaries, established a preferred partnership with Wellington Management Company, LLP. This agreement designates Wellington as the preferred subadviser for a significant portion of The Hartford's mutual funds, excluding certain specialized or variable product-related funds. Additionally, Wellington will be a preferred partner for specific 'Covered Funds' primarily offered to U.S. retail investors through third-party broker-dealers. The partnership outlines specific restrictions on Wellington's subadvisory activities with competing funds and sets terms regarding fee structures, including a fee waiver program for fixed income funds subadvised by Wellington. The agreement also includes provisions for a right of first refusal for Wellington in the event of a sale of The Hartford's mutual fund business and a make-whole payment obligation under certain termination scenarios. The Preferred Partnership Agreement is set to terminate on June 5, 2018, with several conditions for earlier termination by either party or automatically.

Key Highlights

1The Hartford entered into a Preferred Partnership Agreement with Wellington Management Company, LLP, effective December 5, 2011.
2Wellington is designated as the preferred subadviser for most of The Hartford's mutual funds (Hartford Funds).
3Wellington is also a preferred partner for 'Covered Funds' targeted at U.S. retail investors.
4The agreement includes mutual restrictions on Wellington's subadvisory engagements with competing funds.
5The fee structure includes an agreed fee schedule, Wellington's pro rata participation in fee changes, and a fee waiver program for fixed income funds.
6The Hartford has granted Wellington a right of first refusal concerning the sale of The Hartford's mutual fund business.
7The agreement includes a 'make-whole payment' provision triggered under specific termination or sale scenarios related to the mutual fund business.

HARTFORD INSURANCE GROUP, INC. 8-K Report, Material Agreement (Dec 8, 2011)

Summary

Key Highlights

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