The Hartford expects to move from the No. 5 to the No. 3 spot nationally in individual life insurance with a $1.12 billion acquisition of Fortis Financial Group’s life, annuity and mutual fund business.
According to Sue Honeyman, a Hartford spokesperson, closure of the deal will boost the company into the No. 1 slot in variable annuities.
The purchase will provide The Hartford with an additional 3,000 producers, and mark the company’s first venture into retail distribution.
As of Sept. 30, 2000, Fortis Financial Group had approximately $11 billion in assets under management, including $4 billion in mutual fund assets. Through the first nine months of 2000, the company’s earnings were approximately $60 million.
“We have again achieved our financial objectives of delivering double-digit core earnings growth while exceeding our ROE target,” said The Hartford’s Chairman and CEO Ramani Ayer. “Our agreement to purchase the domestic life operations of Fortis will further advance our strategy of growing our life and asset accumulation businesses to take advantage of demographic trends.”
The Hartford’s life operations, one of its strongest units according to Honeyman, reported core earnings of $156 million for the fourth quarter, a 22 percent increase from $128 million for the same period last year, driven primarily by 22 percent earnings growth in investment products.
Total investment products sales and deposits increased 20 percent to $5.6 billion in the fourth quarter, compared with $4.7 billion in the fourth quarter of 1999. Contributing to the solid growth were a 16 percent increase in retail mutual fund sales to $1.3 billion; significant growth in governmental sales, which includes a $1.0 billion sale of a defined contribution program to the state of California; and 44 percent growth in the company’s institutional liabilities business.
The Hartford’s core earnings for the fourth quarter of 2000 were $252 million, or $1.09 per diluted share, up 14 percent from $221 million, or $0.99 per diluted share, for the fourth quarter of 1999, reflecting solid performance in the life operations, along with stronger commercial lines and personal lines results. Core earnings exclude net realized capital gains and losses (after-tax) and certain non-recurring items.
After-tax catastrophe losses were $9 million in the fourth quarter, compared to $21 million in the comparable quarter of 1999. The Hartford’s net income increased 22 percent to $273 million in the fourth quarter, compared with $223 million for the fourth quarter of 1999. Fourth quarter net income of $1.18 per diluted share was an 18 percent increase over the $1.00 per diluted share for the same period in 1999.
Fourth quarter net income results include a $69 million (after-tax) gain resulting from the sale of the company’s Netherlands-based Zwolsche Algemeene NV subsidiary, which was partially offset by net realized investment losses of $48 million (after-tax).
Revenues were $3.9 billion for the fourth quarter of 2000, up 13 percent from $3.4 billion in the same period a year ago. The revenue increase was due to continued growth in group benefits, and other investment products, along with strong premium growth in personal and small commercial insurance, as well as the hardening of prices in other commercial businesses and reinsurance. Also contributing to the increase were higher net realized capital gains, primarily the result of the aforementioned sale of Zwolsche.
Life operations individual annuity sales declined 17 percent to $2.3 billion, reflecting the effects of the volatile equity market and declining interest rates during the fourth quarter. Variable annuity sales were $2.1 billion and fixed annuity sales were $219 million.
Property-casualty operations core earnings for the property-casualty operations were $115 million in the fourth quarter, compared with $116 million for the fourth quarter of 1999. Improving operating trends, including price increases in commercial and personal lines, along with lower catastrophe losses, had a favorable earnings impact. This was offset by a decline in the company’s reinsurance results.
Net written premiums for the quarter were $1.7 billion, a 4 percent increase from the same period last year. Premiums grew 20 percent in the select customer operation of small commercial, and 7 percent in the middle market, where price increases continue to hold and retention rates are improving.
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