Hartford Financial Services Group Inc. (HIG:US), the insurance company pruning operations after an activist investor urged it to split up last year, hired Deutsche Bank AG (DBK) to seek a buyer for its Japanese business, people with knowledge of the matter said.
The people asked not to be identified because the process is private. The Japan unit had about 400,000 variable annuities contracts invested in stocks and bonds worth $27 billion as of March 31, according to a presentation to investors on April 11. Hartford had another $67 billion of annuities in the U.S. and U.K., according to the presentation.
Hartford has been retreating from life insurance and annuities under Chief Executive Officer Liam McGee to focus on property-casualty. Billionaire John Paulson, formerly Hartford’s largest shareholder, pressed McGee to spin off property and casualty from its life-insurance business in February 2012 to increase shareholder value. Annuities had saddled the firm with ballooning liabilities during the financial crisis.
The Hartford, Connecticut-based company stopped selling annuities overseas in 2009 and sold its retirement plans and individual life-insurance businesses this year.
Shannon Lapierre, a spokeswoman for Hartford, declined to comment, as did Mayura Hooper, a spokeswoman for Deutsche Bank.
Hartford gave its Japanese annuities business a so-called market consistent value, a measure tied to cash flow, claims and expenses, of negative $1.2 billion as of March 31, according to the presentation to investors last month. Market consistent value “does not reflect the price a buyer would pay or receive for the block,” the presentation shows.
Selling the Japanese business could be difficult because it is unclear how much it is worth, said Nina Gupta, an analyst with Portales Partners in New York.
“They are shrinking it on their own at a fairly decent pace,” she said. “I don’t think they would sell it unless the pricing is very attractive.”
Variable annuities are insurance contracts with payouts tied to the performance of bond and stock markets. Sun Life Financial Inc. (SLF) and other insurers have struck deals to divest annuities because low rates have made it costlier for them to cover the guarantees embedded in such contracts.
Beth Bombara, who oversees the annuities units at Hartford, told investors last month that the firm would consider divesting annuities at the right price.
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