Hartford Financial Services Group Inc. (HIG), the 201-year-old U.S. insurer, is seeking buyers for its mutual-fund unit, which may fetch $1.5 billion or more, said four people with knowledge of the matter.
Hartford has contacted companies with rival asset- management operations as well as private-equity investors, said the people, who spoke on condition of anonymity. Hartford’s mutual-fund business had about $104 billion of assets under management at the end of the first quarter, according to a regulatory filing.
Chief Executive Officer Liam McGee, hired in 2009, has reorganized the life insurance and savings business to conserve capital following losses under his predecessor, Ramani Ayer. McGee sold stock last year to repay a $3.4 billion U.S. bailout and divested a Canadian mutual fund business. The company, which returned to profit in 2010, may need to contribute capital to its Japanese business, Standard & Poor’s said last month.
“Freeing up a billion dollars worth of capital would be pretty nifty,” said Randy Binner, an insurance analyst with FBR Capital Markets. “You have this lingering issue in Japan, which could cost a lot to hedge.”
Hartford, which discontinued sales in Japan in 2009, retains liabilities tied to customers who purchased variable annuities, the equity-based retirement products, before the financial crisis. Hartford is working on “a more comprehensive hedging solution in Japan,” Chief Financial Officer Christopher Swift told analysts on a conference call on May 3.
McGee, 56, grouped the company’s mutual fund, life insurance, annuity and retirement plan businesses under a Wealth Management division. David Levenson was promoted in July to president of Wealth Management, reporting to McGee.
Hartford advanced 39 cents, or 1.4 percent, to $27.95 at 4:01 p.m. on the New York Stock Exchange and has gained about 5.5 percent this year.
Hartford boosted profit by selling the Canadian fund business and a third-party claims-administration operation. Net income was $1.68 billion last year after a loss of $887 million in 2009. The net loss was $2.75 billion in 2008.
Hartford, based in the Connecticut city of the same name, is using bankers at Goldman Sachs Group Inc. (GS) and UBS AG to handle the potential sale, the people said. Shannon Lapierre, a Hartford spokeswoman, declined to comment, as did Andrea Rachman of Goldman Sachs and Torie von Alt of UBS.
The mutual-fund unit had net income of $132 million in 2010, according to a regulatory filing. Hartford entrusts management of a portion of its mutual funds to Wellington Management Co. The insurer manages some of the funds through its investment-management division.