Prudential Financial Agrees to Acquire Hartford’s Life Unit for $615 Million

Published on September 28, 2012

HartfordPrudential Financial Inc. agreed to acquire the individual life-insurance business of Hartford Financial Services Group Inc. for $615 million, bulking up its U.S. operations as its rival delivers on a promise to slim down.

The deal, which is expected to close early next year, will also allow Hartford to free up almost $1 billion in capital it held to support the business, the company said in a statement.

The transaction is Prudential's first big acquisition since it paid American International Group Inc. nearly $5 billion for two Japanese life insurers in early 2011. Prudential Chief Executive John Strangfeld said this summer that it was "critical" for the company to improve returns and find ways to effectively deploy billions of dollars of excess capital.

For Hartford, the sale would complete its goal to narrow its focus to property-casualty and group-benefits insurance and mutual funds. It "represents a significant milestone in the execution" of the company's strategy "to deliver greater value to shareholders," Hartford Chief Executive Liam McGee said in a statement.

Prudential and Hartford announced the agreement after the market close, and both companies' shares climbed after The Wall Street Journal reported earlier in the day that a deal was imminent. Prudential shares rose $1.08, or 2%, to $54.82 on Thursday, while Hartford climbed 62 cents, or 3.3%, to 19.30.

Under the agreement, a so-called reinsurance transaction, Prudential will assume responsibility for approximately 700,000 Hartford life policies. Prudential also will receive $7 billion in investment assets from Hartford that are earmarked for future claims on those policies, among other assets and liabilities.

The combination will create an organization "with greater scale, enhanced product offerings and expanded distribution expertise," Mr. Strangfeld said.

As the divestiture plan was launched, Hartford was facing criticism from big shareholder Paulson & Co., about the stock's weak performance. The hedge-fund firm has since stepped back from its activist role.

"Hartford has made substantial progress in a short period time to become a more focused company, which we believe will have a positive impact on its valuation," Charles Murphy, a Paulson & Co. analyst, said in an email following the deal's announcement.

In recent weeks, Hartford has announced deals to sell its retirement-plans business to Massachusetts Mutual Life Insurance Co., a broker-dealer business to AIG, and an individual-annuities distribution platform to Forethought Financial Group Inc.

In scaling back, Hartford also is running off its variable-annuity business. Hartford sold guarantees of lifetime withdrawals, even if the underlying funds tanked, and those have proved costly since the financial crisis.