HC2 Holdings has completed its acquisition of long-term care and life insurance businesses, United Teacher Associates Insurance Company (UTAIC) and Continental General Insurance Company (CGIC) from American Financial Group. (AFG).
“We are thrilled to close this transaction with AFG and to begin building our insurance platform. We believe this acquisition provides a strong base on which to grow our insurance vertical and also offers further diversification for HC2,” says Philip Falcone (pictured), HC2’s Chairman, President and Chief Executive Officer. “We expect to see continued improvements to the business and asset portfolio, which we believe will enhance the credit profile for policyholders and create incremental shareholder value at HC2. We look forward to adding more long-term care insurance assets to this platform as we believe this industry is primed for consolidation.”
“We are very excited to have successfully completed this transaction with HC2 and believe it to be mutually beneficial to both parties,” says Craig Lindner, AFG’s Co-Chief Executive Officer.
The purchase price of approximately USD15 million will consist of approximately USD7 million in cash, USD2 million in aggregate principal amount of the Company’s 11.000 per cent Senior Secured Notes due 2019 and approximately one million shares of common stock of the Company, valued at approximately USD6 million. In connection with obtaining regulatory approval for the transaction, AFG agreed to provide up to an aggregate of USD35 million of capital support for the insurance companies, on an as-needed basis to maintain specified surplus levels subject to immediate reimbursement by HC2; this agreement expires five years after closing. In exchange for this agreement, AFG received warrants to purchase two million shares of HC2 common stock.
As of September 30, 2015, UTAIC’s and CGIC’s combined statutory capital was approximately USD85 million. UTAIC and CGIC also had more than USD1.4 billion of total combined invested assets under management as of September 30, 2015.
This acquisition represents HC2's ongoing vision to acquire operating businesses across a diversified range of industries and to branch out into new verticals. The entities will be wholly-owned operating companies held by HC2’s new insurance unit, Continental Insurance Group, Ltd, and their results will be consolidated in HC2’s financial statements beginning in the fourth quarter 2015
