CNO sells run-off subsidiary to Wilton Re
CNO Financial Group has entered into an agreement to sell 100 percent of the common stock of Conseco Life Insurance Company (CLIC) to Wilton Re.
CLIC is a wholly owned life insurance subsidiary consisting primarily of closed block interest-sensitive and traditional life insurance and annuities.
The transaction, when completed, will reduce its statutory run-off reserves by $3.4 billion.
As part of the agreement, Bankers Life and Casualty Company, a wholly owned life insurance subsidiary, will recapture approximately $160 million of traditional life reserves previously reinsured to Wilton Re, paying $28 million.
CNO’s board of directors has approved an increase in the quarterly dividend to $0.06 per share on the company's common shares, representing a 100 percent increase. The dividend will be payable March 24, 2014, to shareholders of record at the close of business on March 14, 2014.
“The disposition of these low returning and historically volatile closed-blocks of business marks another significant milestone for the company," said Ed Bonach, CEO of CNO. "The divestiture of CLIC and the recently announced LTC reinsurance transaction enable us to shed the legacy of the past and devote our attention to our core business segments and meeting the needs of the fast growing and under-served middle-income market. These transactions will unlock stranded capital, be accretive to ROE, reduce the risk profile of the company and further support the decision to double our common stock dividend."
The purchase price consists of the value ascribed to the closed blocks of business plus CLIC's statutory capital and surplus at closing. CLIC's capital and surplus is expected to benefit by approximately $36 million from certain intercompany transactions which will transfer accident and health business out of CLIC prior to closing.
Based on CLIC's capital and surplus as of December 31 2013 and the expected benefit from the intercompany transactions, the purchase price would be approximately $237 million. The proceeds will be further adjusted to reflect CLIC's actual statutory capital and surplus at the time of closing.
CNO has estimated that the announced transactions will result in a pro forma GAAP after tax loss of approximately $303 million and a reduction to shareholders' equity of approximately $447 million (including the impact of the reduction to net unrealized gains included in accumulated other comprehensive income).
The transactions will increase deployable capital and are expected to have no material impact to leverage as a portion of the proceeds are required to pay down debt.
The sale of CLIC is subject to customary closing conditions and certain regulatory approvals, and is expected to close mid-year 2014.
