This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Japan Woes Forcing Hartford's Fund Hand: Analysts

Stocks in this article: HIGPFG

NEW YORK ( TheStreet) -- Hartford Financial Services Group (HIG) is trying to unload its profitable mutual-fund business in order to calm investors worried about losses in its Japanese unit, according to industry analysts.

"Their business in Japan has caused a lot of uncertainty for investors," says FBR Capital Markets analyst Randy Binner. "The company is adequately capitalized, but a billion in extra capital would be a good deal for them because of concerns due to the level of yen, interest rates and uncertainty over regulations."

A Bloomberg report says the insurer is shopping its mutual-fund unit for $1.5 billion. Goldman Sachs (GS) and UBS (UBS) are running the sale, according to the report.

The unit has $104 billion in assets and generated $2.3 billion of net inflows over the past year, according to published reports.

Hartford did not comment on the sale speculation.

Hartford discontinued sales of annuities in Japan in 2009 after poor results, but it continues to manage liabilities from the business through expensive derivative hedges.

"It makes a lot of sense. That take out price sounds about right," Binner argues, adding that Hartford has been looking to raise more capital as investors have grown uneasy about the costs tied to its run off of its variable annuity business in Japan.

Binner says that the company had allocated $1 billion of capital against that business, but in a first-quarter earnings conference call management explained that it was working on additional an "hedging solution" for losses in Japan.

However, the news of the mutual fund unit sale surprised some analysts such as Credit Suisse analyst Thomas Gallagher, who says the move would be at odds with the company's strategy to create longer term value.

"This is an attractive business, given the lack of capital intensity, strong free cash flow, and favorable contribution to the company's return on equity," Gallagher says in a note issued Thursday. "Since we view this as one of the best parts of the HIG non-P&C business, we wonder whether this suggests that HIG's intent to return capital to shareholders has met some resistance from the rating agencies."

Not all analysts believe that selling the asset would be a mistake. Deutsche Bank (DB) analyst Darin Arita said in a note that the market remains pessimistic on the Hartford and a sale would increase the bank's market cap by 70 percent to $3.6 billion.

Morningstar asset management analyst Gregory Warren said he did not know what buyers would be interested in the business.

"I was kind of under the belief that most of the selling of asset management businesses were done," Warren says.

Hartford's stock was trading down nine cents at $27.47.

--Written by Maria Woehr in New York.



To contact the writer of this article, click here: Maria Woehr.

To follow the writer on Twitter, go to http://twitter.com/newsgirlmw.

To submit a news tip, send an email to: tips@thestreet.com.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,805.41 +127.51 0.76%
S&P 500 1,964.58 +13.76 0.71%
NASDAQ 4,483.7150 +30.9230 0.69%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs