The Hartford expands product offering through Navigators acquisition

Hartford Financial Services Group is  acquiring The Navigators Group for $2.1 billion in a move that will see the US insurer expand its offerings and underwriting risk appetite.

The Hartford currently operates in property and casualty insurance, group benefits and mutual funds. Now it is adding specialty underwriter The Navigators Group in a transaction already approved by the boards of directors of both companies. The deal is expected to close in the first half of 2019.

“We are excited to announce the acquisition of Navigators, which we are confident will achieve key strategic and financial objectives for The Hartford,” said The Hartford’s Chairman and CEO Christopher Swift. “It expands our product offerings and geographic reach, and adds tenured and proven underwriting and industry talent while strengthening our value proposition to agents and customers. We are optimistic about our combined growth opportunities and expect the acquisition to generate attractive returns.”

Navigators, which was founded in 1974, operates in the global marine, construction and energy industries, as well as in US excess casualty and surplus lines. In addition to an established presence at Lloyd’s, the company also has growing underwriting operations in Europe, Asia and Latin America. The company currently operates three business segments: US insurance (58 percent of 2017 gross written premiums), international insurance (29 percent) and global reinsurance (13 percent).

The Hartford’s president Doug Elliot added: “This transaction combines two organizations with disciplined underwriting cultures and a shared commitment to innovation, financial performance, and attracting and retaining top talent. Together, we will leverage a more complete product and service offering through a best-in-class distribution network enabled by our combined underwriting, claim capabilities and risk engineering, and enhanced by The Hartford’s strong brand.”

Navigators is headquartered in Stamford, Conn., with 22 locations in the US and eight locations internationally. The company has approximately 820 employees globally who will join The Hartford upon closing. Approximately 600 of its employees are based in the US and 150 are located in the UK.

The Hartford expects the acquisition to generate an attractive return over time. The impact of the acquisition on The Hartford’s consolidated 2019 and 2020 financial results will depend on a variety of factors, including the timing of the close, finalization of purchase accounting impacts, such as determination of goodwill and other intangible assets, integration costs, and acquisition-related charges, including transaction costs and changes in Navigators’ loss reserves or other balance sheet items.

The acquisition is expected to result in an immaterial reduction in 2019 net income before considering the impact of acquisition-related charges, which have not yet been finalized. Excluding acquisition-related charges as well as integration costs, the company expects the acquisition to be immediately accretive to 2019 net income.

For 2020, The Hartford expects the acquisition to be accretive to net income by $30 million to $75 million and to core earnings by $60 million to $95 million. This is comprised of a contribution by Navigators of $80 million to $125 million to net income and $110 million to $145 million to core earnings, offset by a reduction of approximately $50 million in The Hartford’s net investment income, after tax, due to the cash used to fund the acquisition. All of these estimates are preliminary and will be updated based on market conditions, business plans, financial results and other developments between now and closing.