Hartford Cuts Japan Annuity Risk With Hedges; Shares GainZachary Tracer
Hartford Financial Services Group Inc. is increasing the use of hedging to end the insurer’s risk of currency fluctuations and equity-market volatility on savings products sold to Japanese investors. The company gained in New York trading.
“The recently expanded Japan hedge program effectively eliminates FX and equity risk in the Japan VA block,” Chief Executive Officer Liam McGee said today at a presentation, using abbreviations for foreign exchange and variable annuities. “Hartford’s VA risk has been dramatically reduced.”
McGee has been working to decrease the chance that liabilities will climb on the annuities as the Hartford, Connecticut-based insurer shifts its focus to property-casualty coverage. The CEO created a unit, Talcott Resolution, to wind down annuity contracts. He has also named Beth Bombara to manage Talcott and announced a plan to buy some U.S. clients out of the contracts.
Hartford advanced 3.2 percent to $27.87 at 10:44 a.m. The shares have climbed about 40 percent in the past year as higher equity prices and a decline in the value of the yen lowered the company’s liabilities.
The insurer also boosted its outlook for 2013 core earnings to as much as $1.55 billion. In February, Hartford said the figure would be as much as $1.48 billion. The insurer is scheduled to report first-quarter results on April 29. The period will include a $600 million charge tied to its expanded hedging, the company said.
Customers agreed to give up 22 percent of the 20,500 policies targeted in the first round of buyouts and 12 percent of those in the second round as of April 5, Hartford said in a presentation. The insurer mailed offers on 4,500 more policies on April 1.
McGee also has reached deals to sell individual life insurance, retirement plans, individual annuities distribution and Woodbury Financial broker-dealer businesses in 2012, freeing $2.2 billion in capital by the first quarter of this year.