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.