Something is amiss . . . What’s going on at The Hartford Life Insurance Company?
In a big surprise, The Hartford stunned advisers when it announced recently that it is exiting the annuity business entirely. Moreover, management at the embattled company stated that the carrier plans to sell off both its life insurance business and its independent broker-dealer, Woodbury Financial Services Inc. According to the Investment News broker-dealer database, Woodbury is the 24th-largest independent broker-dealer in the US, with around 1,600 reps.
The carrier, which once had a large market share of the variable annuity marketplace before the 2008 crisis, said it would place its individual annuity business into runoff, and seek sales or other strategic alternatives for its individual life insurance business and its retirement plan business.
The purge at The Hartford comes after the company’s largest shareholder, hedge fund manager John Paulson, urged the company to take drastic measures to boost the carrier’s share price. This seems like an example of the tail wagging the dog.
As a result of the purge, The Hartford will concentrate its efforts on property and casualty insurance, group benefits, and mutual funds. According to The Hartford’s chairman, president, and CEO, Liam E. McGee, these businesses are expected to deliver greater profitability. “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. 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.”
In case you were wondering, this is how a CEO will talk when not enough people will sell or buy their products and they need to abandon ship. The company will stop all new annuity sales Friday, April 27.
David Snowden, spokesman with The Hartford, said that “many” of the insurer’s annuity employees will continue in their current roles. “We are stopping sales, but will continue to service annuity customers and the in-force business,” he said. “We don’t expect a significant near-term impact.” Snowden added that the insurer’s announcement does not affect clients’ ability to add money to their existing annuities. Now, if you think that The Hartford or any other company that announces they are leaving a line of business will continue to give great service to that product line, then I really do have some ocean front property in New Mexico I’d like you to invest in. And if that’s not a tale, enough tall he had to add that clients are welcome to add more money to their contracts right up to the time they will quit the business. What a deal!
Financial advisers and broker-dealers have shied away from the carrier ever since the financial crisis, when The Hartford suffered losses tied to its variable annuities business and wound up taking government TARP money.
The Hartford has been trying to right the ship for its annuities business ever since; evidently it hasn’t worked out very well for them. Winning back advisers proved difficult, and very few advisors seemed interested in their newer variable annuities. Last year, Hartford ranked 23rd out of 38 among variable annuity sellers, according to Morningstar.
Although carriers have their own reasons for getting out of businesses, if advisers aren’t won over by an insurer, then it’s the kiss of death to the insurance company. It’s like the advisors were “The Godfather” and they just gave The Hartford a double cheek kiss.
If you currently have any life, annuities or retirement policies with The Hartford, please don’t panic. Other insurance companies will undoubtedly step up and buy the business lines from The Hartford, but you really do need to evaluate what’s in your best interest . . . and the time to do that is now! After all, The Hartford just evaluated your business with them and decided to send you a “Dear John” letter. Maybe you should evaluate them and do the same.