8-KMaterial AgreementsRegulation FDOther Events+1

HARTFORD INSURANCE GROUP, INC. 8-K Report, Material Agreement (Jun 26, 2017)

Filed June 26, 2017For Securities:HIGHIG-PG

Summary

The Hartford Financial Services Group, Inc. (HIG) announced on June 26, 2017, the entry into a definitive agreement to transfer a significant portion of its U.S. qualified pension plan liabilities. The company will purchase a group annuity contract from Prudential Insurance Company of America, transferring approximately $1.6 billion, or 29%, of its $5.6 billion U.S. pension plan obligations. This transaction covers roughly 16,000 retirees and former employees, whose pension benefits will be guaranteed by Prudential starting November 1, 2017. While this move is expected to reduce The Hartford's pension liabilities and free up capital, it will result in an estimated $485 million after-tax pension settlement charge to net income in the second quarter of 2017, and a reduction to stockholders' equity of approximately $140 million ($0.37 per diluted share). The company also plans to contribute $300 million to the plan by year-end 2017 to maintain its pre-transaction funded status.

Key Highlights

  • 1The Hartford to transfer $1.6 billion in U.S. pension liabilities to Prudential via a group annuity contract.
  • 2This represents approximately 29% of the company's $5.6 billion U.S. qualified pension plan obligations.
  • 3The transaction covers approximately 16,000 vested plan participants, with Prudential guaranteeing their benefits from November 1, 2017.
  • 4An estimated $485 million after-tax pension settlement charge is expected in Q2 2017.
  • 5Stockholder's equity is expected to decrease by approximately $140 million ($0.37 per diluted share).
  • 6The company plans a $300 million contribution to the plan by year-end 2017 to maintain funded status.
  • 7The transaction is expected to close by June 30, 2017, subject to customary conditions.

Frequently Asked Questions

The primary purpose is to de-risk The Hartford's balance sheet by transferring a significant portion of its U.S. qualified pension plan liabilities to Prudential. This reduces the company's financial exposure and administrative burden associated with these obligations.

The transaction is expected to result in a significant pension settlement charge of approximately $485 million (after-tax) to net income in the second quarter of 2017. Additionally, it will reduce stockholders' equity by about $140 million, or $0.37 per diluted share.

For the approximately 16,000 Transferred Participants, their pension benefits will be guaranteed by Prudential Insurance Company of America starting November 1, 2017. They will continue to receive their benefits from The Hartford's plan until that date, after which Prudential will handle administrative and payment responsibilities.

The company intends to contribute $300 million by the end of 2017 to ensure the plan maintains its funded status prior to the transaction. This helps mitigate any potential negative impact on the plan's financial health and regulatory requirements.