What is the financial impact of this sale on The Hartford?

The company estimates a U.S. GAAP after-tax loss of approximately $675 million and a statutory surplus loss of approximately $275 million in its U.S. life subsidiaries, which will be recorded as discontinued operations in the second quarter of 2014. However, the transaction is also expected to generate a capital benefit of around $1.4 billion.

What are the conditions for closing the transaction?

Closing is contingent upon several factors, including obtaining regulatory approvals from Japanese financial authorities and other regulators. Additionally, a specific Bloomberg index (CDX IG CDSI S22 5Y) must not exceed 150 basis points on certain days leading up to the closing. The agreement also has a termination date of October 1, 2014.

How will the sale impact The Hartford's financial reporting?

The results of operations for HLIKK prior to the closing will be reported as discontinued operations starting in the second quarter of 2014. This means HLIKK's financial performance will be excluded from income from continuing operations and core earnings.

HIG/HIG-PG 8-K: Material Agreements & Regulation FD

Q: What is the primary purpose of this filing?

This Form 8-K announces a material definitive agreement for The Hartford to sell its Japanese subsidiary, Hartford Life Insurance KK (HLIKK), to ORIX Life Insurance Corporation for $895 million. It also details the financial implications of the sale, including expected losses and capital benefits.

Summary

On April 28, 2014, The Hartford Financial Services Group, Inc. (HIG) announced a definitive agreement through its subsidiary, Hartford Life, Inc., to sell all equity of its Japanese subsidiary, Hartford Life Insurance KK (HLIKK), to ORIX Life Insurance Corporation for approximately $895 million in cash. This sale represents a significant divestiture of international operations, specifically focusing on the disposition of a variable annuity business in Japan. The transaction includes the recapture of certain risks and liabilities by HIG's U.S. subsidiaries related to the business being sold, though HIG will continue to provide reinsurance for a portion of fixed payout annuities. The sale is expected to result in a pro forma after-tax U.S. GAAP loss of approximately $675 million and a statutory surplus loss of approximately $275 million in HIG's U.S. life subsidiaries, to be recognized in the second quarter of 2014. These amounts will be reported as discontinued operations. Concurrently, the transaction is projected to provide a substantial capital benefit of approximately $1.4 billion, driven by net sales proceeds and a reduction in required capital in U.S. life insurance subsidiaries due to terminated reinsurance agreements.

Key Highlights

1Hartford to sell Japanese subsidiary HLIKK to ORIX Life Insurance Corporation for $895 million cash.
2Transaction involves the sale of HLIKK's equity, primarily its variable annuity business.
3HIG will recapture certain risks and liabilities associated with the sold business into its U.S. subsidiaries.
4Expected U.S. GAAP after-tax loss of approximately $675 million and statutory surplus loss of $275 million to be recognized in Q2 2014, reported as discontinued operations.
5Projected capital benefit of approximately $1.4 billion, including net sales proceeds and reduced capital requirements.
6Closing is subject to customary conditions, including regulatory approvals in Japan and a specific market index condition.
7Deal has a termination date of October 1, 2014, if not closed by then.

HARTFORD INSURANCE GROUP, INC. 8-K Report, Material Agreement (Apr 28, 2014)

Summary

Key Highlights

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