Hartford Financial Exiting Annuity Business
HARTFORD, Conn. (AP) - Hartford Financial Services Group Inc. is exiting the annuity business so it can focus on its property and casualty insurance, group benefits and mutual funds businesses.
Its shares rose more than 6 percent in premarket trading.
The announcement on Wednesday comes a little over a month after hedge fund manager John Paulson urged Hartford to spin off its property and casualty insurance business. At that time Hartford said that it would review Paulson's plan, but warned that a breakup wouldn't be easy.
Hartford said that it will stop new annuity sales on April 27 and anticipates taking a $15 million to $20 million after-tax charge in the second quarter. Annual run-rate expenses are expected to decline by about $100 million, before taxes, starting next year.
Paulson's hedge fund, Paulson & Co. Inc., owns an 8.4 percent stake in Hartford. A representative for the hedge fund could not be immediately reached for comment.
Hartford Financial also said it is looking to sell or pursue other options for its individual life, Woodbury Financial Services and retirement plans but that it will continue to write new business in those areas.
Its shares rose $1.34, or 6.2 percent, to $23.05 in premarket trading.
The Hartford, Conn., company said its decision to exit the annuity business came after a board evaluation that was conducted over the past several quarters that ended this week. Annuities, which are a popular component of retirement plans, enable individuals to invest and get payments at a later date or series of dates.
In February, Hartford reported that earnings for its individual annuity business fell to $86 million in the fourth quarter, down from $96 million in the prior-year period.
"The Hartford's sharper focus will lead to an organization that, over time, will be positioned for higher returns on equity, reduced sensitivity to capital markets, a lower cost of capital and increased financial flexibility," President and CEO Liam McGee said in a statement.
Christopher Swift, executive vice president and chief financial officer, said in a statement that the individual life, Woodbury Financial Services and retirement plans "will be better positioned for success as part of other organizations."