HC2' Continental General Insurance To Buy Humana's Long-Term Care Insurance Unit

(RTTNews) - HC2 Holdings Inc. (HCHC) said Monday that its insurance subsidiary, Continental General Insurance Company or "CGIC", has signed a definitive agreement to acquire Humana Inc.'s (HUM) long-term care or "LTC" insurance business, KMG America Corporation.

The transaction requires Humana to make a $203 million cash capital contribution to Kanawha prior to closing. Humana's capital contribution is subject to adjustment based on certain items. The transaction is expected to be immediately accretive to CGIC's Risk Based Capital ratio and statutory capital.

As of June 30, 2017, KMG's subsidiary Kanawha Insurance Company had approximately $150 million in Statutory Capital and Surplus with approximately $2.3 billion of cash and invested assets. Once the proposed acquisition has been completed, CGIC will have cash and invested assets of approximately $3.5 billion.

The acquisition is subject to customary closing conditions and regulatory approvals, including the South Carolina Department of Insurance. CGIC expects the transaction will close by the third quarter of 2018.

Separately, Humana said it expects to record a net loss associated with the sale of KMG of approximately $400 million, or $2.75 per diluted common share. The estimated loss includes a pretax loss of approximately $900 million, offset by the expected tax benefit of approximately $500 million. When recognized, the loss on the sale of this non-strategic business will be excluded from Adjusted earnings per share.

Humana noted that it will fund the transaction with approximately $203 million of parent company cash contributed into KMG, subject to customary adjustments, in addition to the transfer of approximately $150 million of statutory capital with the sale, which together should be more than offset by the estimated $500 million cash savings associated with the expected tax treatment of the sale.

Excluding the loss on sale, Humana does not anticipate a material impact to earnings in 2017 or 2018 from the sale of the business.