Allmerica Exits Life Sales
Allmerica Financial Corp. is getting out of the variable annuity and variable life insurance business, selling those operations to The Goldman Sachs Group Inc. as part of a $385 million deal. Allmerica officials said the life insurance operations were a distraction to the company’s efforts to become a major property and casualty insurer.
Since taking over in August 2003, Allmerica President and Chief Executive Officer Frederick H. Eppinger has concentrated on making the insurer strictly a property and casualty insurer, and has generated higher profits every quarter. The sale will trigger the layoffs of 275 workers, or about 12.5 percent of Allmerica’s workforce in Worcester, Mass. Allmerica will operate the life insurance operations for another nine to 12 months during a conversion period, and the majority of the job cuts will occur in the fourth quarter of 2006.
In conjunction with this sale, AFC is seeking approval from the state for a dividend of $40 million from its remaining life business. Total cash proceeds from the sale and the dividend are projected to be approximately $385 million, approximately $70 million of which is expected to be deferred and paid over a three year period.
“This transaction delivers on our strategy to monetize the value of our life business that has been in run-off since 2002, and enables us to apply even greater focus on the continued growth of our property and casualty business,” said Eppinger.
The transaction will include the sale of Allmerica’s primary life insurance company, AFLIAC, which holds 94 percent of Allmerica’s variable insurance and annuity business.
Safety National Buys ERC Workers Comp
Safety National Casualty Corporation has acquired renewal rights to the excess workers’ compensation business of Employers Reinsurance Corporation. The St. Louis, Mo.-based company said it will immediately begin offering renewal quotes to expiring ERC policyholders. No reserves or liabilities are being transferred in the transaction. Safety National Casualty Corporation, a specialist in excess workers’ compensation insurance, is a subsidiary of Delphi Financial Group Inc.
Insurers Halt Florida Home Policies
Florida’s fourth-largest homeowner insurer, Nationwide Insurance Co. of Florida, has stopped writing new homeowners policies, despite the fact it obtained approval to charge higher rates in the state. More than 228,000 Florida homeowners have Nationwide policies.
Nationwide becomes the seventh insurance company to announce it is leaving Florida, or not writing new policies.
Last month, state regulators approved an average increase of 21 percent on Nationwide’s home policies and 25 percent for mobile homes.
“Even with rate increases, you have other pieces of the puzzle that are always changing (in the insurance market),” Joe Case, a spokesman for the Columbus, Ohio-based company told the Miami Herald. “That demands a continuing evaluation of our business strategy.”
China Bank to Launch P/C Unit
China’s Bank of Communications Ltd. is planning to form a partnership to enter the property and casualty insurance business on the mainland. BC, China’s fifth largest commercial bank, formed a wholly-owned insurance subsidiary, China Communications Insurance Co., registered in Hong Kong in 2002. China’s insurance market tripled in the past five years to $52 billion. While foreign insurers and financial services companies have mainly targeted China’s life sector for investment, the property and casualty segment is also a growing market in the country. Total premiums increased last year by 16 percent to around $8.4 billion.
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