A.M. Best Comments on The Hartford’s Intent to Sell its Japan Annuity Company
April 28, 2014 by A.M. Best
Oldwick – A.M. Best has commented that the ratings of The Hartford Financial Services Group, Inc. (The Hartford) (Hartford, CT) [NYSE: HIG] and its subsidiaries will remain unchanged following the recent announcement that it has signed a definitive agreement to sell 100% of the outstanding shares of its Japanese subsidiary, Hartford Life Insurance K.K., (HLIKK) to ORIX Life Insurance Corporation (ORIX LIC), a subsidiary of ORIX Corporation (ORIX) (Tokyo, Japan).
This transaction eliminates The Hartford’s Japanese variable and fixed annuity exposure with the exception of a reinsurance agreement covering $1.1 billion fixed payout annuity reserves. The sale is expected to close in July 2014, subject to regulatory approvals. The announced transaction remains consistent with The Hartford’s strategy to focus on its property/casualty, group benefits and mutual funds businesses that it has been executing on over the past two years.
The sale is expected to generate a GAAP loss but provide capital benefits from the reduction of risk associated with the Japanese business. In addition, with the exception of the fixed payout annuity treaty, all reinsurance agreements between HLIKK and The Hartford’s U.S. life operations will be terminated. A.M. Best will continue to monitor the retained U.S. variable annuity block, review ongoing stress testing analysis and discuss with management its future capital management plans, including planned utilization of sales proceeds.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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