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HARTFORD INSURANCE GROUP, INC. 8-K Report, Material Agreement (Oct 23, 2017)

Filed October 23, 2017For Securities:HIGHIG-PG

Summary

The Hartford Financial Services Group, Inc. (HIG) announced on October 23, 2017, through its indirect wholly-owned subsidiary, Hartford Life and Accident Insurance Company, the acquisition of Aetna Inc.'s U.S. group life and disability business for $1.45 billion in cash. This strategic move involves acquiring approximately $3.4 billion in investment assets and corresponding reserves of $3.3 billion, as of June 30, 2017, with adjustments expected at closing. The transaction is structured with a significant portion of the cash consideration allocated as a ceding commission to Aetna. The acquisition is expected to close in early November 2017, pending regulatory approvals. The company anticipates this transaction will be accretive to both net income and core earnings starting in 2018. Projected net income accretion is estimated between $60 million to $80 million, and core earnings accretion between $80 million to $100 million for 2018, after accounting for integration costs and amortization of intangible assets.

Key Highlights

  • 1The Hartford is acquiring Aetna's U.S. group life and disability business for $1.45 billion cash.
  • 2The transaction involves the acquisition of approximately $3.4 billion in investment assets and $3.3 billion in reserves.
  • 3The deal is structured with a large ceding commission paid to Aetna, reflecting a reinsurance agreement.
  • 4Closing is anticipated in early November 2017, subject to regulatory approvals.
  • 5The acquisition is expected to be accretive to net income by $60-$80 million and core earnings by $80-$100 million in 2018.
  • 6Annual amortization of intangible assets is estimated at $20-$30 million (after-tax).
  • 7Integration and restructuring costs are estimated at $50 million (after-tax) over the next 24 months.

Frequently Asked Questions

The primary purpose of this acquisition is to expand The Hartford's group life and disability business by acquiring a significant block of business from Aetna, which is expected to enhance its market position and generate future earnings.

The Hartford expects the acquisition to be accretive to its net income and core earnings starting in 2018. Net income accretion is projected to be between $60 million and $80 million, and core earnings accretion between $80 million and $100 million in 2018, after accounting for associated costs.

The company anticipates integration and restructuring costs of approximately $50 million (after-tax), expected to be incurred over the next two years. Additionally, there will be annual amortization of intangible assets estimated at $20 million to $30 million (after-tax).

The cash consideration for the transaction will be funded through existing capital resources of The Hartford, including dividends from its insurance subsidiary companies.