Insurer and wealth manager The Hartford is trimming its focus to a few core business areas: property and casualty, group benefits and mutual funds.
To accomplish this, the company will place its individual annuity business into runoff and pursue sales, or other alternatives, for its individual life, Woodbury Financial Services and retirement plan businesses.
“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,” said The Hartford’s chairman, president and chief executive Liam McGee, in a statement. “With this portfolio and the actions we are taking, we are on the right path to unlock value and deliver superior, long-term returns for shareholders.”
In the remaining three businesses: property and casualty, group benefits and mutual funds, the Hartford says it has a “competitive market position, strong capital generating ability and lower sensitivity to capital markets,” and that the “sharper focus positions The Hartford to deliver superior performance and greater shareholder value.”
Further, McGee stated that Mutual Funds segment “is a high return business, and we are enthusiastic about our strategy to accelerate sales growth with the expanded Wellington Management sub-advisory relationship.”
The move comes after the Hartford’s management and directors’ board stringently re-evaluated the company’s strategy and business over the past several quarters.
Much of this corporate soul-searching was spurred by John Paulson, whose hedge fund Paulson & Co. Inc., is the Hartford’s largest shareholder, with 8.5% of its stock.
In a statement, Paulson said that his firm supported today’s announcements, “not as a conclusion of the strategic review, but as a first step in creating a clear delineation between The Hartford's [property and casualty] and non- [property and casualty] businesses.”
Moreover, Paulson states that the firm is pleased that “The Hartford is taking steps to focus on core operations and to divest or discontinue non-core and capital intensive businesses.”
“We believe that putting the variable annuity business in runoff and selling the non-core individual life, retirement plans and broker dealer businesses will raise cash, free up capital, permit deleveraging and increase its financial flexibility,” he stated.
Successfully executing these plans will strengthen the company's ability to separate the core property and casualty businesses from the non-core businesses in the future, which Paulson stated “we continue to believe would create the greatest short-term and long-term shareholder value and strengthen the company.”