TOKYO -- American insurance giant Hartford has decided to sell its Japanese operations to leasing firm Orix for some 90 billion yen ($875 million), becoming the latest foreign insurer to exit from the market.
Hartford officials visiting Japan and representatives from Orix agreed Friday on the general terms of the deal. A final agreement is expected as early as April.
Hartford Life Insurance, which has been operating here since 2000, grew on the back of strong sales of variable annuities with guaranteed principal. The company enjoyed the top market share for variable annuities in Japan before the Lehman shock of 2008.
But following the financial crisis, guaranteeing paid-in premiums proved costly, weighing on the company's profit. In 2009, it stopped selling new policies.
With the investment environment improving, net profit recovered to 25.1 billion yen for the April-December period of 2013. But the parent had been looking for a buyer for the operations, which have been viewed as a noncore business.
Other foreign insurers are also leaving Japan or shrinking operations. The U.K.'s Prudential decided last year to sell off a Japanese life insurance subsidiary to SBI Holdings. German firm Allianz stopped selling new policies here in 2012.
Amid global efforts to impose stricter capital requirements on insurance companies, the sector faces an urgent need to unload low-profit businesses.
Orix's life insurance unit boasts 2 million policies with individuals, mainly for medical and death coverage. Hartford Life Insurance has 370,000 annuity plans in force and holds 2.7 trillion yen in total assets. Orix will consider making the newly acquired operations a subsidiary of Orix Life Insurance or possibly merging the two units.