EXCLUSIVE-Principal Financial nears sale of insurance units to Talcott Resolution -sources

Band David French

January 18 (Reuters)Principal Insurer Financial Group Inc PFG.O is in advanced talks to sell two of its units, with capital reserves totaling $25 billion, to Talcott Resolution Life Insurance Co HLIACO.UL, according to people familiar with the matter.

The deal would be the culmination of a strategic review that Principal launched last year after coming under pressure from activist investment firm Elliott Management Corp to shed its low-growth, high-growth businesses. capital intensity. Principal said he would use part of the proceeds to fund an increase in his stock buyback program.

A deal for Talcott to acquire Principal’s U.S. retail fixed annuity business and its universal life with secondary guarantees (ULSG) unit could be announced as early as this week, the sources said.

It is possible that negotiations could break down at the last minute, the sources added, requesting anonymity as the matter is confidential.

Talcott Resolution is owned by investment firm Sixth Street, which declined to comment. Principal Financial also declined to comment.

The price Talcott would pay could not be known, but the transaction is expected to generate significant benefits for Principal through a combination of sale proceeds, freed-up capital and other financial improvements.

By comparison, when Sixth Street agreed last year to acquire a fixed-index annuity business from Allianz ALVG.DE with $35 billion in reserves against it, the German insurer said the deal unlocked $4.1 billion in total value.

Main announced in June that it would sell fixed annuity and ULSG units to focus on its fastest growing pension, global asset management and US benefits and protection businesses. It also added, as part of its deal with Elliott, two independent directors to its board last year.

The annuity book had $18 billion in cash reserves at the end of March 2021, while the ULSG business had $7 billion in reserves, according to a company presentation to investors in June.

The presentation outlined plans to return between $1.5 billion and $1.7 billion in cash to shareholders in 2022 in the form of dividends and share buybacks, though those numbers would be higher after Talcott’s divestment, it said. the sources.

Buyout companies have been enthusiastic acquirers of such life insurance and annuity assets because they offer a large pool of long-term capital for their credit investments. Some, like Apollo Global Management Inc. APO.N and Blackstone Inc. BX.N, have dedicated insurance arms.

(Reporting by David French in New York; editing by Jonathan Oatis)

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