NU Online News Service, Dec. 1, 2003, 3:33 p.m. EST – Hartford Financial Services Group Inc., Hartford, has agreed to buy the group benefits business of CNA Financial Corp., Chicago, for about $500 million in cash, and Hartford Chairman Ramani Ayer says his company continues to look for good deals.[@@]
Hartford is getting CNA’s group life and accident businesses as well as its short-term disability and long-term disability businesses. Hartford is not taking CNA’s group long term care insurance business.
CNA expects the deal to lead to a loss of about $200 million after taxes in financial statements prepared according to Generally Accepted Accounting Principles, but the company also expects the deal to lead to a gain of more than $100 million in financial statements prepared according to statutory accounting principles.
Hartford hopes to complete the deal by the end of the year and fund it with a mixture of new debt and equity.
Richard Mucci, a senior vice president at Hartford Life and director of its group benefits operations, will lead the newly combined group benefits organization, Hartford says.
The New York office of Fitch Ratings Ltd. reacted to the deal announcement by affirming the fixed income ratings of Hartford and the insurer financial strength ratings of Hartford’s three main life insurance subsidiaries. The Fitch rating outlook is stable.
The CNA deal should strengthen Hartford’s position in the group benefits market and make the sources of the company’s life earnings more diverse, Fitch says in a comment on the deal.
With the help of expense cuts, the deal should increase Hartford’s overall profitability beginning in 2004, Fitch adds.
Hartford already has a strong presence in both the group life and the disability insurance markets. The CNA acquisition will make Hartford an even bigger player in those markets, according to Fitch.
“While the addition to HFSG’s overall earnings will be modest relative to the entire operation, the favorable impact will begin immediately after the close,” Fitch says in its comment.
About 1,200 CNA employees will move to Hartford, CNA says.
The sale should provide additional capital for CNA’s main insurance subsidiary, Continental Casualty Company. CNA talked earlier this month about the need to beef up Continental Casualty’s capital levels because of big increases in its property-casualty insurance claim reserves.
Ayer, Hartford’s chairman, says his company could make more deals.
“We’re always on the lookout, and, when we find transactions that make economic sense and are accretive to earnings, we will seize the opportunity,” Ayer says.