American Financial To Sell Run-off Long-Term Care Business To HC2 Holdings

(RTTNews) - American Financial Group, Inc. (AFG) announced that it agreed to sell the legal entities containing all of its run-off long-term care insurance business to HC2 Holdings Inc. (HCHC) for an initial payment of $7 million in cash and HC2 securities, subject to adjustment based on certain items, including operating results through the closing date.

In addition, AFG may also receive up to $13 million of additional proceeds from HC2 in the future based on the release of certain statutory liabilities of the legal entities sold by AFG.

The legal entities involved in the transaction, United Teacher Associates Insurance Company and Continental General Insurance Company, contain all of AFG's $800 million in net GAAP long-term care insurance reserves, as well as nearly $300 million of net GAAP annuity and life insurance reserves.

The transaction is expected to close in the third quarter of 2015, subject to customary conditions, including receipt of required regulatory approvals.

In accordance with generally accepted accounting principles, AFG will record an estimated after-tax non-core loss on the sale in the first quarter of 2015. Excluding the impact of potential future proceeds, this loss is currently estimated to be between $105 and $115 million, and may be adjusted based on final proceeds received and final net assets disposed.

Due to a significant tax benefit from the sale, AFG expects to receive after-tax proceeds of between $105 and $115 million from the transaction, before any potential future proceeds. While the sale does not result in a change to AFG's 2015 core net operating earnings guidance, management does expect the sale to be accretive to AFG's earnings and returns on equity over time as the proceeds are utilized.