Fitch Comments on Hartford’s Announcement of Agreement to Sell Its Japan Unit

Hartford Financial Services Group, Inc. (HFSG) announced this morning that it has reached a definitive agreement to sell Hartford Life Insurance K.K. (HLIKK) to a subsidiary of Orix Corp., a publicly held international financial services organization based in Tokyo, Japan, for consideration of approximately $895 million.

HLIKK houses HFSG's Japan annuity operations, the sale of which will, with the exception of reinsurance on approximately $1.1 billion of fixed payout annuities written by HLIKK, result in HFSG's exit from the Japan market.

Despite the GAAP loss incurred by HFSG on the sale, Fitch views the elimination of the company's exposure to the Japan variable annuity business as a considerable offsetting factor. The sale of this unit is in line with management's stated objective of refocusing HFSG on its ongoing property casualty, group benefits and mutual fund businesses.

HFSG estimates that the sale of HLIKK, which is expected to close in July 2014, will result in a GAAP loss of approximately $675 million and a substantial statutory capital benefit generated by the sales proceeds and a release of capital backing reserves reinsured by HFSG's U.S. life insurance subsidiaries.

Fitch affirmed the ratings of HFSG and most of its operating subsidiaries on April 22. Concurrently, Fitch upgraded the Insurer Financial Strength (IFS) rating of Hartford Life and Accident Insurance Company (HLA) to 'A' from 'A-', and downgraded the IFS ratings of Hartford Life Insurance Company (HLIC) and Hartford Life and Annuity Insurance Company (HLAIC) to 'BBB+' from 'A-'. HFSG's ratings have a Stable Outlook. All of these rating actions incorporated the potential for the sale of HFSG's Japan operations with terms that did not violate the rating sensitivities that Fitch cited in the associated Rating Action Commentary on April 22. Fitch views the terms of the transaction announced to be within expectations.

Additional information is available at 'fitchratings.com'.

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