Aflac Incorporated (NYSE: AFL) announced today that its insurance subsidiaries American Family Life Assurance Company of Columbus (Aflac of Columbus) and American Family Life Assurance Company of New York (Aflac of New York) have entered into a definitive agreement to acquire Zurich North America's U.S. Corporate Life and Pensions (Group Benefits) business, which consists of group life, disability and absence management products.
"We are very excited to acquire the Group Benefits platform of Zurich North America," said Teresa L. White, president of Aflac U.S. "This strategic transaction further enhances our value proposition to brokers and employers and aligns with our vision of being the number one distributor of benefit solutions to the U.S. workforce."
Aflac of Columbus and Aflac of New York will reinsure on an indemnity basis Zurich North America's U.S. in-force group life and disability policies with annualized earned premium of approximately $115 million. Aflac will also acquire assets needed to support the group life and disability business, along with an absence management platform. Subject to regulatory approvals and customary closing conditions, the transaction is expected to close in the second half of 2020.
It is anticipated that Zurich North America employees dedicated to the U.S. group life and disability business will transfer to Aflac. In addition, Aflac and Zurich have entered into an agreement with Benefit Harbor LP to transfer the assets and employees of Benefit Harbor Insurance Services, the outsourced platform supporting the group life and disability business of Zurich North America, to Aflac. Aflac has separately expanded its relationship with Benefit Harbor to provide certain specialized services to group life and disability clients. No changes are expected in the location of where business activities reside today.
"This transaction, together with last year's acquisition of Argus Dental and Vision, expands Aflac's value proposition and enhances our position on the first page of the employee benefits enrollment," said Richard L. Williams, Jr., executive vice president and chief distribution officer of Aflac U.S. "We intend to build upon the strong framework created by Zurich by continuing to grow Aflac's group benefits business and provide a more holistic product set to brokers and employers."
In addition to the transaction, Aflac's acquired group benefits business will be included as a partner within Zurich's Global Employee Benefits Solutions Partner Network, allowing Aflac to offer its employee benefit products to Zurich's global clients with a U.S. presence.
The transaction is consistent with Aflac Incorporated's strategy for capital deployment into growth initiatives. Funding of the transaction, along with required capital in support of assumed businesses, will come from capital held within the U.S. insurance companies. Aflac of Columbus ended 2019 with a risk-based capital ratio (RBC) of 539% and estimates the acquisition will impact RBC in the range of 15 to 20 points. Aflac expects the acquisition and associated growth expenses to be dilutive to 2020 adjusted earnings per diluted share in the range of two to three cents. Aflac further expects modest run-rate dilution over the near-term as it continues to expand the platform.
Piper Sandler & Co. served as financial advisor and Sidley Austin LLP as legal advisor to Aflac Incorporated. Barclays served as financial advisor and Willkie Farr & Gallagher LLP as legal advisor to Zurich.
Aflac management will address questions regarding the transaction and overall strategy on Aflac Incorporated's first quarter earnings call scheduled for April 30, 2020.
ABOUT AFLAC INCORPORATED
Aflac Incorporated (NYSE: AFL) is a Fortune 500 company, helping provide protection to more than 50 million people through its subsidiaries in Japan and the U.S., where it is a leading supplemental insurer by paying cash fast when policyholders get sick or injured. For more than six decades, insurance policies of Aflac Incorporated's subsidiaries have given policyholders the opportunity to focus on recovery, not financial stress. Aflac Life Insurance Japan is the leading provider of medical and cancer insurance in Japan where it insures 1 in 4 households. For 14 consecutive years, Aflac has been recognized by Ethisphere as one of the World's Most Ethical Companies. In 2020, Fortune included Aflac Incorporated on its list of World's Most Admired Companies for the 19th time, and Bloomberg added Aflac Incorporated to its Gender-Equality Index, which tracks the financial performance of public companies committed to supporting gender equality through policy development, representation and transparency. To find out how to get help with expenses health insurance doesn't cover, get to know us at aflac.com or aflac.com/espanol.
Aflac herein means American Family Life Assurance Company of Columbus and American Family Life Assurance Company of New York.
ABOUT ZURICH'S CORPORATE GROUP LIFE AND PENSIONS BUSINESS
Zurich North America's Corporate Group Life and Pensions business offers exclusively true group life, short- and long-term disability and absence management solutions aimed at delivering an end-to-end offering that help make it easier for companies to manage their employee absences while also helping align with federal and state leave laws and quickly adapt as new laws are passed.
