Insurer Aetna unloads group life, disability for $1.45B
The Hartford is paying $1.45 billion to buy the U.S. group life and disability business of Aetna Inc., making it the second largest group and life insurer and boosting its data analytics to more quickly spot problems in disability claims.
About 1,800 jobs will move to The Hartford from Aetna, Chief Executive Officer Christopher Swift said in an interview Monday.
“We share Hartford roots. We're the older sibling,” he said.
The Hartford has been in business more than 200 years, while Aetna dates its incorporation to 1853.
Shares of The Hartford slid 4 percent, closing at $54.06, down $2.43. Aetna shares rose slightly, up 63 cents, to $161.47.
Wells Fargo Securities analyst Elyse Greenberg said in a note that shares fell significantly because the deal “effectively removes” The Hartford as a potential candidate for a merger or acquisition by another company.
It was widely believed The Hartford would sell its variable annuity business, Talcott Resolution, “and be an attractive (mergers and acquisition) candidate due to its small commercial platform,” she said.
Greenberg said she believes the Aetna deal shows that The Hartford is pursuing its own acquisitions to grow its business rather than looking to sell the company.
The deal, which is expected to close next month, will contribute to The Hartford becoming the second largest group life and disability insurer, the insurer said.
The business has a “stable risk profile, attractive returns and strong long-term growth prospects,” Swift said.
“This acquisition deepens and enhances The Hartford's group benefits distribution capabilities and accelerates the company's technology strategy,” the company said.
The Hartford said combining the group life and disability businesses strengthens its position as a leader in the large employer market and increases its presence among midsize employer clients.
It also creates new opportunities to distribute additional products to a base of more than 20 million customers who will be insured by the combined business, the company said.
In the acquisition, The Hartford obtains digital technology expected to advance its analytics in workers' compensation and disability.
To finance the deal, The Hartford will pay Aetna cash consideration of $1.45 billion, primarily comprised of a commission paid by Hartford Life & Accident Insurance Company, the primary group benefits insurance operating subsidiary.
“Our transaction with The Hartford will benefit both our shareholders and customers, allowing us to have a stronger focus on our strategy of creating a personalized approach to improving member health,” said Aetna President Karen Lynch.
Aetna, which is moving its headquarters to New York from Hartford next year, is pursuing a digital transformation into a health company, shifting from its traditional role as a health insurer.
A driver behind the move, Aetna says, is the access to a broader market of possible employees who are part of the “knowledge economy,” or industries that rely on digital and other forms of technology.
The transformation is aimed at “personalizing” health care, and focusing on how to individually tailor a plan to keep a person healthy rather than just treating the illness or disease. The plans would be based, in part, on data that is gathered for people of a similar age, health background and other factors.
Such an approach, experts say, would cut the cost of health care in the long-run and decrease the number of large claims a health company must pay.
Swift said the deal is a more significant addition to The Hartford than a divestiture by Aetna.
“It's just a small piece of their pie and a bigger piece of our pie,” he said.