The Hartford Financial Services Group said Tuesday it has closed its sale of the company’s Japan annuity business to Orix Life Insurance Corp., which could mean larger dividends for The Hartford’s shareholders in the future.
The sale results in a $1.4 billion net statutory capital benefit for The Hartford. Orix is paying $895 million, plus a price adjustment of $68 million, to buy The Hartford Life Insurance K.K., the Japan annuity subsidiary. The transaction results in an after-tax accounting loss of $625 million, using Generally Accepted Accounting Principles, in The Hartford’s second-quarter earnings.
The Hartford said Tuesday it is seeking approval from the Connecticut Insurance Department to issue “extraordinary dividends” related to the reduction in required capital that the company maintained through reinsurance agreements connected to the annuity business.
“The Hartford’s capital flexibility and risk profile are substantially improved as a result of this transaction,” The Hartford’s Chief Financial Officer Beth A. Bombara said in a statement. “We look forward to updating you on any additional capital management actions we may take as a result of this transaction, and expect any actions to be balanced consistent with our prior approach, including equity repurchase and debt repayment.”
The Hartford’s new CEO, Christopher J. Swift, said in a statement: “Completing the Japan transaction is another significant milestone in The Hartford’s journey to focus on our P&C, Group Benefits and Mutual Funds businesses. This is an excellent transaction for shareholders that permanently reduces the risk profile of the company while also generating a significant capital benefit for the company.”