Products March 21, 2012

The Hartford Puts Retirement on the Block

The Hartford is pursuing the sale of, or other strategic alternatives, for its Retirement Plans business.
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The Hartford decided to focus on its property and casualty, group benefits and mutual funds businesses, each of which has a competitive market position, strong capital generating ability and lower sensitivity to capital markets. As a result, the company is placing its Individual Annuity business into runoff and is pursuing sales or other strategic alternatives for Individual Life, Woodbury Financial Services and Retirement Plans.  

“This work began in mid-2011 as part of strategy discussions. In our work we consider a broad range of factors, market dynamics, returns, capital markets sensitivity, competitive positions and The Hartford’s capital requirements,” said Liam E. McGee, chairman, president and CEO of The Hartford, during a press call. “The objective was to find the right path to deliver superior performance and greater shareholder value.”

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According to a timeline provided by the company, The Hartford will conduct the sales process for Individual Life, Woodbury Financial Services and Retirement Plans during the next six months, and plans to close transactions within 12 months. During the six-month sales process, the company will continue to write new business. Individual annuity will be closed to new sales effective April 27.

Proceeds from any transactions will give The Hartford additional financial flexibility, providing opportunities to deleverage, de-risk the legacy annuity blocks, invest in the business and potentially take other capital management actions. 

 

Christopher J. Swift, executive vice president and CFO of The Hartford, commented during the press call: “This decision to sell these businesses was very difficult. These are strong successful businesses, and we will pursue the best outcome for all stakeholders. We are at work with our investment bankers and it will take a number of months to make a definitive agreement.”

The Hartford’s Retirement Plans business has $52.3 billion in assets under management. It offers 401(k), 403(b) and 457 products. In 2011, it had $766 million in revenues. The Individual Life group has $12.4 billion of reserves separate account liabilities and had $1.4 billion in revenues in 2011.

Woodbury Financial Services has 1,400 brokers and is the 12th largest independent broker dealer in the nation. It had $250 million in 2011 revenues.

In 2012, the company expects 68% of earnings to come from the Property & Casualty Commercial market, 15% from Consumer Markets, 10% from Group Benefits and 7% from its Mutual Funds business.

“The Hartford’s sharper focus will lead to an organization that, over time, will be positioned for higher returns on equity, reduced sensitivity to capital markets, a lower cost of capital and increased financial flexibility,” said McGee. “With this portfolio and the actions we are taking, we are on the right path to unlock value and deliver superior, long-term returns for shareholders.”   

 

Compliance March 20, 2012

Professional Service Firms Concerned about Plan Compliance

Eight-four percent of professional service firms say compliance with regulations is their top concern when sponsoring retirement plans for the employees.  
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According to research from Nationwide Financial Services, Inc., 28% of firms with fewer than 50 employees do not feel that their fiduciary requirements are being met. Tiffany Grinstead, associate vice president of Retirement Plans marketing at Nationwide, told PLANADVISER she thinks firms feel this way because the topic of fiduciary requirements can be overwhelming. These businesses run many different parts of the business, not just employee retirement plans. “The entire concept of being legally liable makes them very nervous,” she noted.

Additionally, 28% of plan sponsors were unable to show a complete understanding of the Employee Retirement Income Security Act of 1974 (ERISA). “ERISA is a fairly complex act,” said Grinstead. “They [plan sponsors] misunderstand what their personal responsibilities are. They tend to not realize that they are liable.” ‘’

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Based on the research, firms also say they need financial advisers who are experts on regulatory and legislative issues. Grinstead added that plan sponsors of small firms need advisers to spend a lot of time doing hand-holding. “This is a great opportunity for advisers to make sure they are strong in the industry,” she said. “Folks who learn for the first time that they have this responsibility will look to their adviser [for guidance].” 

While ensuring plans are in compliance with regulations was the most important service advisers can provide for all small businesses, other services were ranked differently based on firm size and tenure. For example, firms with fewer than 50 employees ranked “timely resolution of operational issues” as the second most important service they expect to be provided, while larger firms placed more value on the “selection and monitoring of investment options.”

Firms that have been in business for more than 50 years ranked “investment selection and monitoring” as the second most important service to support their plan, while businesses less than 10 years old cited “providing participant advice” as their second priority, behind keeping the plan in compliance.

Overall, 69% of professional services firms expect an annual or quarterly plan review, and 67% expect educational materials to be available for their participants. 

 

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