Jan 18 (Reuters) - Insurer Principal Financial Group Inc
is in advanced talks to sell two of its units, with
capital reserves totaling $25 billion, to peer Talcott
Resolution Life Insurance Co, 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 and capital-intensive businesses. Principal has said
it will use part of the proceeds to fund an increase in its
share buyback program.
An agreement for Talcott to acquire Principal's U.S. retail
fixed annuity business and its unit for universal life insurance
with secondary guarantees (ULSG), could be announced as early as
this week, the sources said.
It is possible that negotiations will fail at the last
minute, added the sources, requesting anonymity because the
matter is confidential.
Talcott Resolution is owned by investment firm Sixth Street,
which declined to comment. Principal Financial also declined to
The price Talcott would pay could not be learned, but the
transaction is expected to generate significant benefits for
Principal through a combination of sale proceeds, released
capital and other financial enhancements.
By comparison, when Sixth Street agreed last year to acquire
a fixed-index annuities business from Allianz with $35
billion of reserves against it, the German insurer said the deal
unlocked $4.1 billion of total value.
Principal said in June it would divest https://www.reuters.com/article/principal-fincl-review-elliott-idCNL2N2OA1I7
the fixed annuity and ULSG units in order to focus on its
higher-growth retirement, global asset management and U.S.
benefits and protection businesses. It also added, as part of
its agreement with Elliott, two independent directors to its
board last year.
The annuity book had $18 billion of cash reserves set
against it as of the end of March 2021, while the ULSG business
had $7 billion of reserves, according to a company presentation
to investors in June.
The presentation outlined plans to return between $1.5
billion and $1.7 billion of cash to shareholders in 2022 through
dividends and stock buybacks, although those numbers would be
higher following the divestment to Talcott, the sources said.
Buyout firms have been enthusiastic acquirers of such life
insurance and annuity assets https://www.reuters.com/article/us-insurance-m-a/u-s-insurance-asset-sales-attract-new-private-equity-players-strategies-idUSKBN2A811G
because they offer a major pool of long-term capital for their
credit investments. Some, like Apollo Global Management Inc
and Blackstone Inc, have dedicated insurance
(Reporting by David French in New York; editing by Jonathan