On Thursday, HartfordFinancial Services Group Inc. (HIG) announced that it has agreed to sell the mutual funds business Hartford Investments Canada Corp, known as Hartford Investments, to CI Financial Corp. for approximately C$1.75 billion in assets.
Although the terms of the deal remain undisclosed, the transaction is expected to culminate by the end of December 2010. The deal is subjected to regulatory approvals from the Canadian authorities.
Hartford Investments manages 18 mutual funds and has been one of the fast-growing asset management managers in Canada. On the other hand, CI Financial holds a leading position in the investment management business in Canada and the acquisition blends well with its funds portfolio. Hence, we believe that the deal will be beneficial to both the parties.
While the purchase of Hartford Investment will add C$1.75 billion to CI Financial’s C$91.5 billion fee-earning assets, it will also help Hartford Financial to concentrate on its U.S. operations in order to enhance its operating leverage.
Over the past few quarters, Hartford Financial has suffered from losses in its investment portfolio and higher costs related to the variable-annuity business. We remain concerned with Hartford Financial’s exposure to variable annuities and pressure on Life segment as consumers seek relatively safe investment vehicles for their retirement assets. We also suspect that the company will continue to incur heavy losses on its investment portfolio. However, its TARP repayment has somewhat cushioned its capital position. We believe earnings will gain momentum once the market rebounds to its historical highs.
On Thursday, the shares of Hartford Financial Services closed at $24.20, up 1.3%, on the New York Stock Exchange.
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