With Navigators Group now under its roof, The Hartford has an opportunity to expand its geographic reach and product inventory.
In an all-cash deal worth $2.1 billion, The Hartford plans to purchase international specialty insurer Navigators Group. The acquisition cost equals $70 per share of Navigators stock — a 18.6% premium over the company’s 90-day average trading price and 9% over its price the day before the deal was announced.
Boards of Directors of both firms have approved the deal, which included a “go-shop” clause. In effect, other bidders have 30 days to make an offer for Navigators. If Navigators Group accepts that bid and The Hartford declines to match it, The Hartford would receive a termination fee from the new buyer.
Sandler O’Neill & Partners Analyst Paul Newsome told Reuters the chances of a competing bid are fairly high. “Navigators does have a lot of structural things that make it look attractive to not just one acquirer but a lot of acquirers,” he said. For The Hartford, the attractiveness of making a deal for Navigators Group involved the opportunity to expand into new geographic areas and business lines.
Expansion into New Markets
Operating from offices in Stamford, Connecticut, the United Kingdom, Europe, and Asia, Navigators Group works in 22 industry specialties, including maritime, construction, energy, environmental, professional services, and life sciences. By bringing Navigators Group into the fold, The Hartford expands it footprint in construction, professional liability, financial products, and life sciences, and gains entry into marine, energy, environmental, and construction.
The deal furthers The Hartford’s international reach as well. Not only does Navigators Group have a presence with Lloyd’s of London, it has grown its underwriting business throughout Europe, Asia, and Latin American. Based on gross written premium, Navigators Group’s three primarily business lines are: U.S. insurance (58%); international insurance (29%); and global reinsurance (13%).
The Hartford estimated the acquisition, which is targeted for a first-half of 2019 closing, will slightly reduce its earnings for next year. Beyond that, the insurer anticipates the deal will boost net income between $30 million and $75 million in 2020. To fund the deal, The Hartford will use cash on hand. No share offers are planned.
The Hartford’s Acquisition Strategy
The Hartford’s Chairman and CEO Christopher Swift previously indicated the insurer was seeking to acquire companies with at least $2 billion in premium. Navigators Group satisfied that criterion since it had $1.7 billion in gross written premiums and $1.3 billion in net written premiums in 2017.
If the deal closes, The Hartford will satisfy another of its intentions — to grow its commercial business. By joining the two insurers, the combined entity will have in excess of $8.2 billion in commercial lines net written premium, placing it seventh among U.S. commercial line insurers.
Last year, The Hartford made a similar deal when it agreed to acquire the group life and disability operations of Aetna for $1.45 billion in cash. That acquisition vaulted the company to the second largest group life and disability insurer in the U.S.
Where It Goes From Here
At the same time it’s strengthening its position in the commercial, property and casualty, and group insurance markets, The Hartford is exiting the life and annuities business. This summer, the insurer sold its runoff life and annuity unit, Talcott Resolution, to private equity outfit Cornell Capital LLC for $2.05 billion.
Anytime an established insurer like The Hartford expands its product roster helps insurance agents — especially if they specialize in commercial business lines. Consolidation among insurers may result in fewer companies, but those that emerge will be able to offer a more full lineup of policies at a one-stop shop.