The Hartford Financial Services Group said Thursday it is expecting to post a net loss for the first three months of the year as it posts two charges totaling $740 million.
First-quarter results will include a $600 million charge related to hedging risks in The Hartford’s variable-annuity business in Japan and a $140 million charge for costs incurred in a debt tender offer completed earlier this year to pay off $800 million in outstanding debt.
The Hartford’s CEO Liam E. McGee said reducing the size and risk of the company’s variable annuity business is a key element in The Hartford’s transformation first announced in March 2012 to become more profitable and to improve value to shareholders.
Talcott Resolution is The Hartford’s life insurance run-off operations, which includes variable annuities. Run-off operations are businesses that will discontinue over time after current policies conclude.
Adding hedges makes the variable-annuity block of business self sufficient in terms of capital, the company said. The Hartford took advantage of market conditions that improved the company’s position because the U.S. dollar was stronger relative to the Japanese yen than it has been in the past, the company said.
“We are pleased that as a result of actions we have taken and global market movements, the risk profile of the legacy VA [variable annuity] block has dramatically improved and Alcott’s operations are now capital self-sufficient,” McGee said in a prepared statement.
The Hartford’s Chief Financial Officer Christopher J. Swift said in a prepared statement: “The company’s capital flexibility is significantly enhanced since year end, and our capital generation outlook heading into 2014 and beyond is improved. With the significant progress we have made on The Hartford’s transformation, excess capital generated by the go forward businesses — property and casualty, group benefits and mutual funds — will be available for potential capital management actions or reinvestment in the businesses for future profitable growth.”
The Hartford, at its investor day meeting Thursday in Hartford, increased its full-year 2013 core earnings outlook to between $1.45 billion and $1.55 billion, up from its February outlook of $1.375 billion to $1.475 billion.