P&C insurer CNA Financial Corporation (CNA) has announced plans to sell 100% of its common stock of Continental Assurance Company (CAC), a life insurance subsidiary consisting mostly of structured settlement and group annuities, to a subsidiary of Wilton Re Holdings Limited (Wilton Re).
In addition, affiliates of both CNA and Wilton Re have entered a 100% reinsurance agreement. A Wilton Re subsidiary will reinsure the entirely of the run-off structured settlement annuities that are reinsured by a Bermuda-based subsidiary of CNA. These transactions continue the increase in M&A activity the industry saw in 2013.
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“Over the past several years, we have simplified our operations through targeted dispositions and made strategic investments in higher growth businesses,” says Thomas F. Motamed, chairman and CEO of CNA. “This transaction is another step in the execution of our strategy to create a more focused P&C business capable of delivering consistent performance.”
When completed, these transactions will decrease CNA’s non-core Life & Group GAAP insurance reserves by $3.4 billion and eliminate the majority of their payout annuity business. CNA will receive net proceeds of about $615 million, tax benefits included. It anticipates an after-tax GAAP charge of about $220 million, to be recorded in the first quarter of 2014.
The closing of the transaction remains subject to regulatory approvals and is expected in the second quarter of 2014.