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March 16, 2004 at 07:00 PM
NU Online News Service, March 16, 2004, 5:26 p.m. EST – Safeco Corp., Seattle, has agreed to sell its life and investment operations to a private investment group for $1.35 billion.[@@]
The investment group, which includes White Mountains Insurance Group Ltd., Hamilton, Bermuda, and Warren Buffett’s Berkshire Hathaway Inc., Omaha, Neb., is getting Safeco’s life insurance, group insurance, annuity and mutual fund businesses.
The deal agreement includes a mechanism based on Safeco Life & Investments’ June 30 statutory book value that could increase the purchase price, Safeco says.
In a separate deal, Safeco has agreed to sell its Talbot Financial Corp. insurance brokerage operation for $90 million to an investor group led by Talbot senior managers. Hub International Ltd., Chicago, an insurance brokerage, is backing the Talbot managers, Safeco says.
Safeco hopes to complete both deals by Sept. 30. The company announced in September 2003 that it wanted to sell its life and investments operations and focus on its property-casualty business.
Although the deals will generate a significant amount of cash for Safeco, they probably will lead to an after-tax loss of about $200 million, according to Fitch Ratings, Chicago.
Safeco plans to use the deal proceeds to pay down debt and give some of the proceeds to shareholders.
Safeco is emphasizing that the buyers of Safeco Life and Talbot are committed to stability.
“Current management will continue to run each business with the same commitment to channel distribution and customer service,” Safeco Chairman Mike McGavick says in a statement about the deal.
Analysts at Moody’s Investor Service, New York, say they believe Safeco Life’s product portfolio, distribution arrangements and business strategy will remain unchanged after the transaction closes.
