Newark, N.J.-based Prudential Financial will acquire The Hartford's (Hartford, Conn.) life insurance unit through a reinsurance transaction.
Prudential will pay The Hartford cash consideration of $615 million and primarily will receive approximately $7 billion of general account investment assets and corresponding reserves, and rights and obligations with respect to approximately $5 billion in separate account assets and corresponding liabilities, based on statutory balance sheet values as of June 30, 2012, according to a statement . The cash consideration consists primarily of a ceding commission to provide reinsurance for approximately 700,000 Hartford life insurance policies with face amount in force of approximately $135 billion and is expected to close in early 2013.
"The integration of Prudential's Individual Life Insurance business and that of The Hartford will create an organization with greater scale, enhanced product offerings and expanded distribution expertise to meet the life insurance needs of Americans and their families," says John Strangfeld, chairman and CEO, Prudential Financial, in a statement. "The Hartford's Individual Life Insurance business represents a unique opportunity for us to acquire a very high-quality life insurance business with talented people, complementary capabilities and financial performance consistent with our objectives."
Benefits and provisions of The Hartford's in-force life insurance contracts will remain unchanged, and The Hartford's issuing companies will continue to be the named insurers. Prudential will receive premiums and will be responsible for paying claims and providing customer service and administration.
Prudential also announced that Jim Avery, chief executive officer of its Individual Life Insurance business, will retire when the transaction closes. He will be succeeded by Kent Sluyter, vice president and chief actuary of the business, who has been with Prudential since 1981 and has worked across the Actuarial, Operations, Systems, Risk.
The Hartford has been working to divest itself of its life insurance operations this year after being pressured to do so by investor John Paulson.
"Today's announcement represents a significant milestone in the execution of The Hartford's strategy to deliver greater value to shareholders," The Hartford's Chairman, President and CEO Liam E. McGee said in a statement. "In about six months, we have completed three agreements, all executed at attractive valuations to strong financial institutions that have a strategic interest in the businesses. The Hartford is taking the necessary actions, as outlined in March, to position the company for higher returns on equity, reduced sensitivity to capital markets, a lower cost of capital and increased financial flexibility."
Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio