On Wednesday, Hartford Financial Services Group Inc. (HIG) said it was entering a strategic alliance to offer 401(k) plan sponsors of Lord Abbett a smooth transition to a new plan provider, free transfer and expanded investment opportunities.

Hartford is a leader in retirement services and was named the fastest-growing provider of 401(k) plans in the $250,000 to $10 million market in 2005-2008 by the 401(k) Market Share report. This association provides a great opportunity to Hartford to serve Abbett’s retirement plan clients with its products and new investment opportunities.

Abbett manages nearly 8,000 packaged small 401(k) plans that include more than 59,000 participants and over $1.2 billion in assets. The company will exit the small-business 401(k) plan market after this deal. The transfer of many of these plans will begin immediately.

Hartford’s offers to waive all contingent deferred sales charges on all A and C share plans, a plan termination fee and a 2010 billing fee for plans that submit account opening paperwork by April 1, 2010. Moreover, its Aviator 401(k) program series, which provides expanded fund choices, underwriting and pricing flexibility as well as a third-party co-fiduciary service free of cost, will now be available to Lord Abbett clients.

We remain concerned with Hartford’s exposure to variable annuities and weak capital position as of now and also suspect that the company will continue to incur increasing losses on its investment portfolio. It is difficult to anticipate significant expansion of the valuation multiples at this point in time due to the challenging environment as we expect Hartford to face higher losses in the investment portfolio in the coming quarters. Thus, we are maintaining our Neutral recommendation on the shares.

Read the full analyst report on “HIG”
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