The Hartford seeks Navigators’ expansion for profit boost
The Hartford is looking to expand the Navigators’ business after the acquisition in order to increase its profitability above the firms’ historic levels, executives explained in an Aug. 22 conference call.
Hartford Financial Services Group has entered into a definitive agreement to acquire global specialty insurance holding The Navigators Group in an all-cash transaction of approximately $2.1 billion.
The Hartford is expecting Navigators to achieve a premium growth in the range of 5 to 6 percent, according to CEO Christopher Swift.
“I think there's opportunities to increase the portfolio yield,” Swift said.
“It is about growing the premium base with, I’ll call it, a slightly higher loss ratio and using our financial strength, our distribution networks, cross-selling in a more effective way,” Swift explained.
“There are some modest expense saves. I do think there will be, I’ll call it, a good lift in the investment portfolio with our asset allocation philosophy and methodology.
The Hartford also expects to improve the underwriting process at Navigators to increase business profitability.
“We’ll be able to contribute to their underwriting process, contribute maybe in risk-taking in different ways to help drive a higher ROE (return on equity),” Swift said.
Historically, Navigators’ ROE has been in the range of 7 percent to 9 percent, but The Hartford expects more than that.
“We’re an ROE-focused company. And I think there’s a tools methodology approach mindset that I think we’ll be able to bring to the organization,” Swift said.
The Hartford president Doug Elliot noted that the company has invested significantly in data science and data analytics in the past decade.
“I think we’ll offer something in that regard as we work hard together on improving underwriting results across the board both at The Hartford and also at Navigators,” Elliot said.
In combination with Navigators, The Hartford expects to grow the business by cross-selling the combined product offerings to the respective customer bases.
“We can offer more products and services through a shared distribution network enhanced by The Hartford’s brand and financial strength,” Swift said.
The Hartford also wants to expand Navigators’ reinsurance business, which is currently relatively small, representing around 13 percent of Navigators’ gross written premiums and is comprised of traditional property & casualty (P&C) reinsurance, accident & health (A&H) and other product specialties.
“This (reinsurance) business is an efficient way to participate in certain US and international markets,” Swift said.
The Navigators acquisition is also adding a Lloyd's platform to The Hartford portfolio, extending its capabilities and geographic reach, adding a UK and European underwriting presence.
“Our footprint outside the US is very, very small,” Elliot said. “They've got physical locations in nine cities around the world,” he explained.
The Hartford expects that the Navigators’ international experience will bring into the group a more global thinking.
“Together, we are confident that we can accelerate profitable growth. I look forward to welcoming Stan Galanski (The Navigators CEO) and his leadership team and the 820 Navigator employees worldwide to The Hartford,” Swift added.
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