Hanover Insurance to sell life insurance run-off
By Supantha Mukherjee
BANGALORE (Reuters) - Hanover Insurance Group Inc (THG.N) said it agreed to sell its remaining life insurance business to a unit of Goldman Sachs Group Inc (GS.N) to increase capital flexibility and focus on its property and casualty business.
"It's a positive," said analyst Clifford Gallant of Keefe, Bruyette & Woods, adding that the company sold the business at a better-than-expected price.
Hanover sees total proceeds of about $220 million and expects a loss of $66 million in the second quarter related to the sale.
The loss translates to about $1.27 a share, based on the 52 million shares outstanding as of April 28.
The sale cleans up Hanover's balance sheet and will improve the company's return on equity over time, said Gallant, who expects a second-quarter loss at Hanover.
The company has sold it at a discount to the book but the division was a run-off, which was incurring a small loss for a while and was expected to be sold at a loss, said analyst Michael Phillips of Stifel Nicolaus.
"The company was putting different chunks of its life insurance business in the run-off since 2002," Phillips added.
When an insurance company is being wound up or is not underwriting business in a particular line and letting its present insurance policies run to their expiry dates, it is known as a run-off.
Hanover's business consists of property and casualty operations and life insurance operations, which is a run-off business consisting of proprietary life insurance, annuity and guaranteed investment products issued earlier by its life insurance units.
The insurance holding company also said it was seeking approval from the Massachusetts Division of Insurance for a pre-close dividend from its unit of various assets valued at about $160 million.
The estimated total net proceeds of $220 million include the dividend, transactions costs and settlements.
Shares of the company were up $1.48 at $43.00 in midday trade on the New York Stock Exchange.
(Editing by Amitha Rajan)
