The Hartford was reported Thursday to be seeking bids for its property-casualty insurance operations from The Travelers Cos. and other companies, and exploring the sale of its group life and disability business.
The report Thursday by Bloomberg News, citing unnamed sources, follows months of speculation by analysts that The Hartford Financial Services Group, under pressure to bolster capital, could sell its life or property-casualty businesses, or parts of them.
A sale of the property-casualty business raises the potential for sizable job cuts in the Hartford region, but no deal is believed to be imminent. The Hartford has about 12,500 employees in Connecticut, and Travelers has about 7,000 workers here.
Spokesmen for The Hartford and Travelers declined to comment. Bloomberg said Switzerland-based ACE Ltd., a commercial property-casualty insurer, may also be interested.
It makes sense for The Hartford, which needs to stabilize ratings after multiple downgrades, to seek buyers for its high-quality businesses as a way to raise capital, said Michael Paisan, an analyst and managing director at Stifel Nicolaus in New York.
"Right now, they are in rating agency appeasement mode; they cannot afford to have another downgrade" because it would "severely impact" sales by the life operations, Paisan said.
The Hartford, however, is still waiting to hear whether it will get any funds from the federal Troubled Asset Relief Program and has said it could qualify for $1.1 billion to $3.4 billion. The company says it's still well-capitalized to meet its obligations.
The $3.4 billion could lessen the need to sell part of the company, "but I still think the sale of the property-casualty business is strategically in the interests of The Hartford," Paisan said. He estimated that $4 billion would be a "good starting point" for negotiating the price of the company's whole property-casualty business. The Hartford's entire market capitalization is about $3.2 billion.
Travelers wouldn't be a great fit as a buyer because there's much overlap between the two companies' property-casualty businesses, Paisan said. A better arrangement, assuming it could fetch a higher price, would be to sell The Hartford's commercial lines to ACE and personal lines (auto and homeowners insurance) to German insurer Allianz, he said.
Allianz invested $2.5 billion in The Hartford in October in return for the right to acquire nearly 24 percent of the company.
The Hartford previously was reported to be in talks with MetLife and then with Canada's Sun Life Financial to sell its life and annuity operations, but no deal surfaced from the negotiations.The Hartford's group business -- employer-based life and disability insurance -- posted a $6 million net loss for 2008 but made $72 million in the fourth quarter.
The Hartford has had heavy investment losses and its variable annuity business has been hurt by depressed equity markets.Copyright © 2015, The Baltimore Sun