Paulson files 13D on HIG

PlanMaestro · August 11, 2012

Hartford Mulls Client Buyouts To Cut Risk Buffett Called Ungodly

http://www.bloomberg.com/news/2012-08-10/hartford-mulls-client-buyouts-to-cut-risk-buffett-called-ungodly.html

Life insurers are paying the price for guarantees made to clients before 2008, when stock markets were in the midst of a five-year rally and the yield on the 10-year Treasury was more than 4 percent. The industry took on what billionaire Warren Buffett has called an “ungodly” amount of risk and accumulated liabilities as Treasury yields dropped below 2 percent, making it harder to generate returns to cover the obligations.

The deal to sell the origination unit to Forethought Financial Group Inc. excludes the contracts previously issued by Hartford, and McGee’s firm had a $3 billion variable annuity reserve at the end of the second quarter. The U.S. annuity business was unprofitable in two of the past four quarters, with a combined loss of $27 million in the 12 months ended June 30.

The insurer is studying whether it can reach agreements with other firms to take on liabilities and assets not covered in the Forethought deal, McGee said Aug. 2. Hartford, based in the Connecticut city of the same name, is weighing client payouts even as consumers may opt to stick with their contracts, McGee said, without disclosing the size of potential incentives.

“We are aggressively looking at that,” he said in response to a question about lump-sum payments from Christopher Giovanni, an analyst at Goldman Sachs Group Inc. “That is one of many work streams that we’re considering with great urgency and diligence, because we’re determined to reduce the book as quickly as we can.”