Hartford Financial Services Group Inc. (HIG) is creating “a tremendous amount of financial flexibility” as the insurer divests units and weighs share repurchases, Chief Executive Officer Liam McGee said.
McGee, 58, is focusing on property-casualty coverage, such as commercial insurance and auto policies, after reaching deals this year to sell Hartford's broker-dealer, the retirement-plans business and the individual annuities distribution unit. Prudential Financial Inc. (PRU) has emerged as the lead bidder for Hartford's individual life-insurance arm, people familiar with the matter said last month.
“The businesses that we're staying in have generated a substantial amount of capital,” McGee said in an interview today. “The businesses that we're getting out of consume virtually all of that capital. By selling and shutting down the businesses, we're eliminating that consumption of capital.”
Hartford trades for about 40 percent of book value, a measure of assets minus liabilities. The insurer in the second quarter completed a $500 million share repurchase plan that was authorized in August of 2011.
“Buybacks are certainly among the most accretive things we could do today,” given the firm's book value, he said in the interview at a company office in New York.
McGee said the Hartford, Connecticut-based insurer needs to balance the “obvious appeal” of buybacks with the need to keep cash free to do other deals, such as ones that could require payments to manage the risk of annuities.
Hartford climbed 52 cents, or 2.8 percent, to $19.20 at 10:23 a.m. in New York. The shares have gained 18 percent this year, outpacing the 9.6 percent rally of the 24-company KBW Insurance Index.
A deal with Prudential could happen as soon as today, the Wall Street Journal said today on its website. Hartford declined to comment on the report.