Moody's Investors Service gave a thumbs up to last week's announced $615 million sale of the Hartford Financial Services Group's individual life business to Prudential Financial, despite the transaction reducing some of the Hartford's diversity in its income streams.
In its Weekly Credit Outlook, Moody's says the sale will allow the Hartford “to focus on business in which it has greater scale and competitive advantages.” To that end, Moody's calls the transaction “a credit-positive” for the Hartford.
Moody's notes the sale is the third transaction in an overall restructuring plan at the Hartford. Previously, the Hartford announced its sale of Woodbury Financial Services to American International Group in July, and the sale of its retirement plans business to Massachusetts Mutual Life Insurance Company in September.
“Hartford Group said that after the sales it would shift its focus to strategically important business lines, namely property and casualty insurance, group benefits, and mutual funds,” says Moody's Associate Analyst Stefan Kahandaliyanage in the Weekly Credit Report. “In aggregate, the company expects the three announced transactions at closing will benefit Hartford Group's net statutory capital, based on June 30 financials, by approximately $2.2 billion, including an increase of approximately $1.4 billion in statutory surplus and an $800 million reduction in required risk-based capital.”
For Prudential, Moody's says the deal is credit neutral. “Although the acquisition will enhance its earnings, add diversification and expand distribution, these benefits are offset by integration risk and risk management challenges,” says Moody's.
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