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Hartford Financial Services Group Inc.’s proposed acquisition of Navigators Group Inc. will give Hartford a greater geographic and product reach, adding significantly to its commercial lines capabilities, according to both Hartford and insurance market analysts.
The $2.1 billion all-cash deal announced Wednesday morning, which is expected to close in early 2019, will give Hartford a platform at Lloyd’s of London, bolster its excess and surplus lines presence and add reinsurance and other lines to Hartford’s offerings, its top executives said.
“The combination of our two businesses will meaningfully advance several of the Hartford’s key strategic initiatives: It enhances our commercial lines market presence, with specialty and E&S capabilities, it broadens and deepens our product offerings with expanded industry verticals, and it expands our geographic underwriting reach with an international presence,” Hartford Chairman and CEO Chris Swift said on a conference call with analysts.
In addition, Navigators will add reinsurance capabilities to Hartford, he said. Reinsurance makes up about 13% of Navigators’ gross written premiums.
Navigators has been known for its expertise in marine liability and cargo, specie and hull, and has more recently built its excess casualty, environmental liability and life sciences insurance businesses, said Hartford President Doug Elliot on the call.
“These capabilities are highly complementary with our own initiatives in industry verticals such as marine, construction, technology, life sciences and energy as well as our expansion into surplus lines,” he said.
Mr. Elliot noted during the call that Hartford bought excess and surplus lines insurer Maxum Specialty Insurance Group in 2016, but “our wholesale strategies clearly are accelerated with the combination.”
In addition, the Navigators platform at Lloyd’s and other overseas offices will expand Hartford’s international capabilities, he said, “adding a U.K. and European underwriting presence that we do not presently have.”
The acquisition will also increase Hartford’s management and professional liability business, he said.
“We look forward to bringing Navigators’ specialty lines capabilities to The Hartford, an organization that shares our commitment to underwriting excellence, attracting and retaining top talent, and delivering exceptional customer experiences,” said Navigators President and CEO Stanley A. Galanski in a statement. “Joining The Hartford and leveraging the strength of its balance sheet and quality of its core commercial insurance products, we will create exciting opportunities to deliver enhanced value to our brokers and policyholders.”
Stamford, Connecticut-based Navigators has about 820 staff.
In a presentation outlining the acquisition, Hartford noted the impact buying Navigators would have on its geographic reach.
Hartford said the transaction will provide access to Lloyd’s through syndicate 1221, founded in 1980 as a marine specialist and acquired by Navigators in 1998. Hartford also noted that the move expands its global footprint with claims and underwriting offices in nine international locations. Hartford said the transaction “provides an opportunity to grow target customer segments in select international markets by leveraging Navigators’ growing underwriting operations in Europe, Asia and Latin America.”
Navigators’ business breaks down into three segments, with U.S. insurance accounting for 58% of the total, international 29% and global reinsurance 13%. The largest individual line of business is U.S. property/casualty at 42%, followed by international marine at 12%, and U.S. marine and international property/casualty at 9% each.
“We would expect synergies to be fairly limited given the nature of the specialties involved and that Hartford isn’t already involved in many of the lines Navigators writes,” said Mark Dwelle, director of insurance equity research at RBC Capital Markets L.L.C. in Richmond, Virginia, in a research note issued shortly after the two insurers announced the deal. “The deal will give Hartford a bit of international exposure and will give it a presence at Lloyd’s. It also adds to the company’s overall size and scale, which could produce some modest expense synergies.”
The deal provides Hartford with greater diversification, said Jim Auden, Chicago-based managing director in the insurance group for Fitch Ratings Inc. “Navigators is a specialty company. Much of their business is larger limit, longer tail than what Hartford would write,” he said, noting that marine is a significant part of Navigators’ portfolio. “It broadens their (property/casualty) portfolio” and expands Hartford’s international business “maybe somewhat, Hartford is a very domestic company.”
J. Paul Newsome, managing director at Sandler O’Neill & Partners L.P. in Chicago, noted that Navigators can accept another offer for a limited amount of time.
“The agreement includes a ‘go-shop’ provision designed to afford an opportunity for other potential acquirers to determine whether they are interested in proposing to acquire Navigator,” he wrote. “Accordingly, for 30 days Navigators will have an opportunity to solicit competing acquisition proposals.”
Hartford Financial Services Group Inc. on Monday said it has acquired Maxum Specialty Insurance Group for $168 million in cash.