The purchase was made for a reported $615 million in cash.
Prudential Financial Inc. has announced that it has purchased the Hartford Financial Services Group Inc. individual life insurance business for a cash total of $615 million, adding greater substance to its American operations as its rival works to shed excess weight.
It is believed that the deal will close at or near the beginning of 2013.
According to a statement from Hartford, this will give it the opportunity to help free up close to $1 billion in capital that it had been holding in order to support the company. This is the first large acquisition that Prudential has made since early in 2011. It was at that time that the insurer paid almost $5 billion to purchase two life insurance companies in Japan.
John Strangfeld, the chief executive at Prudential, stated that these actions were “critical” for the insurer to be able to better its returns while identifying positive ways of utilizing their billions of dollars in excess funds.
On Hartford’s side of things, the life insurance sale helps the company to slim down so it can improve its focus.
That insurer has been working to concentrate on its group benefits and its property and casualty products, in addition to mutual funds. Its chief executive, Liam McGee, released a statement that said that the sale “represents a significant milestone in the execution” of the strategy of the insurer “to deliver greater value to shareholders.”
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Both companies made the announcement of the agreement following the close of the market, and they both saw a climb in their shares following the report that had been made in the Wall Street Journal that shared that the deal would be approved at any moment. Following that report, the shares of Prudential rose by 2 percent, while those at Hartford increased by 3.3 percent.
Within this new agreement, which has been labeled a reinsurance transaction, Prudential will be taking on around 700,000 life insurance policies that had belonged to Hartford. Prudential will also take from Hartford about $7 billion in investment assets that were designated for future claims on the policies that have been purchased, in addition to other liabilities and assets.
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