Safeco To Sell Life, Brokerage Units

For $1.44 Billion

BY

Safeco Corp. has agreed to sell its life and brokerage units for $1.44 billion in cash so it can focus on property-casualty operations.

The Safeco Life & Investments unit and the brokerage unit, Talbot Financial Corp., Albuquerque, N.M., accounted for less than 15% of Safecos 2003 revenue.

White Mountains Insurance Group Ltd., Hamilton, Bermuda, and Warren Buffetts Berkshire Hathaway Inc., Omaha, Neb., are leading an investor group that has offered $1.35 billion for Safeco Life. White Mountains and Berkshire Hathaway each would get a 24% stake in Safeco Life.

Safeco Life President Randall Talbot is leading a management group that has agreed to pay $90 million for the Safeco brokerage unit, Talbot Financial Corp., Albuquerque, N.M. Hub International Ltd., Chicago, an insurance brokerage, is backing Randall Talbots team.

Safeco put the life and brokerage units on the block in September 2003 and has talked to dozens of potential buyers, the company says.

David Foy, White Mountains chief financial officer, says his firm thinks the Safeco Life acquisition looks like a “good economic deal.”

The fact that the White Mountains group has no existing life business of its own should minimize disruption for producers, customers and Safeco Lifes 1,500 employees, Safeco executives say.

“Were going to have the same people, the same products and the same service,” says Jim Pirak, Safeco Lifes vice president of marketing.

Safeco Life generated $196 million in operating income in 2003 on $868 million in premiums and other revenue by selling structured settlements, bank-owned life insurance, stop-loss insurance, annuities and asset-management services.

The units distribution network includes 5,000 insurance agencies, 100 financial institutions and 350 benefits administrators. Safeco Life would continue to sell through Safecos p-c agent network after the deal closes, but it would open up to non-Safeco p-c agents, executives say.

The Safeco Life units deal price is just 81% of the units $1.77 billion in adjusted book value. Sellers have had trouble getting good prices for life insurers in recent months, analysts say.

Susanne Sclafane is managing editor of NUs Property & Casualty edition.


Reproduced from National Underwriter Life & Health/Financial Services Edition, March 19, 2004. Copyright 2004 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.