Hartford Financial Services Group has agreed to buy the group benefits business of CNA Financial Corp., Chicago, for about $500 million in cash.
Hartford is getting CNAs group life and accident businesses as well as its short term disability and long term disability businesses. CNAs group long term care insurance business is not part of the deal.
CNA expects the deal to result in an after-tax loss of about $200 million in GAAP financial statements but says the deal will lead to a gain of more than $100 million in statutory financial statements.
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 announcement by affirming the fixed income ratings of Hartford and the insurer financial strength ratings of Hartfords 3 main life insurance subsidiaries. The Fitch rating outlook is stable.
The CNA deal should strengthen Hartfords position in the group benefits market and make the sources of the companys life earnings more diverse, Fitch says in a comment on the deal.
With the help of expense cuts, the deal should increase Hartfords 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 HFSGs overall earnings will be modest relative to the entire operation, the favorable impact will begin immediately after the close,” Fitch says.
About 1,200 CNA employees will move to Hartford, CNA says.
The sale should provide additional capital for CNAs main insurance subsidiary, Continental Casualty Company. CNA talked earlier this month about the need to beef up Continental Casualtys capital levels because of big increases in its property-casualty insurance claim reserves.
Ramani Ayer, Hartfords chairman, says his company could make more deals. “Were always on the lookout, and when we find transactions that make economic sense and are accretive to earnings, we will seize the opportunity,” he says.
Reproduced from National Underwriter Life & Health/Financial Services Edition, December 5, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.