The Hartford’s uncertain future attracts legislators’ attention
HARTFORD — Insurance giant The Hartford has rejected an approximately $23 billion acquisition offer. Whether it would turn down future bids is unclear.
The Hartford’s refusal last month of the proposed combination with insurance multinational Chubb Ltd., has cast doubt on the future of one of the pillars of the state’s insurance sector. The company has remained tight-lipped about its long-term plans, while a prospective deal has sparked scrutiny from state legislators concerned about the impact on a Fortune 500 firm that ranks as of the state’s largest corporate employers.
“It is one of our flagship corporations, and it employs an awful lot of folks,” state Sen. Matt Lesser, D-Middletown, co-chairman of the state legislature’s Insurance and Real Estate Committee said in an interview. “It would be hard to overstate its significance to our regional economy.”
Chubb set off the saga when it submitted March 11 the unsolicited $23 billion proposal to acquire The Hartford. The plan valued The Hartford at $65 per share, comprising a 26 percent premium based on an “unaffected 20-day volume weighted average” share price of $51.70 as of March 10.
In a March 18 statement, Chubb officials said the proposal reflected their belief that “a combination of our two companies ... would be strategically and financially compelling for both sets of shareholders and other constituencies.”
A member of the S&P 500 index, Chubb describes itself as the world’s largest publicly traded property and casualty insurance company. Operating in 54 countries and territories, it employs approximately 31,000 people, with executive offices in cities including New York, London, Paris and Zurich.
In Connecticut, Chubb has locations in Cromwell, Ledyard, New Haven, Simsbury, Stamford and Windsor.
In a March 23 statement,
The Hartford confirmed that its board of directors had unanimously rejected the offer because the board had “determined that entering into discussions regarding a strategic transaction would not be in the best interests of the company and its shareholders.”
Responding to an inquiry from Hearst Connecticut Media, The Hartford declined to comment beyond the March 23 statement.
Chubb officials appear undeterred by the rejection, issuing a March 29 statement that did not rule out another bid.
“Although we were disappointed that The Hartford chose not to engage in discussions regarding a strategic business combination, our shareholders demand of us, and we demand of ourselves, that we remain a disciplined acquiror with an uncompromising focus on the fair value of any institution that we could acquire,” the statement said.
Chubb’s approach to The Hartford prompted another insurance giant, Allianz, to explore a counteroffer, Bloomberg reported late last month.
“I trust The Hartford’s board in rejecting Chubb’s offer,” Lesser said. “My specific concern (about a potential acquisition) is I think they (the prospective buyer) would be more interested in ‘looting’ The Hartford’s book of business than in continuing their commitment to running an insurance company here.”
Lesser and state Rep. Kerry Wood, D-Rocky Hill, co-chairwoman of the Insurance and Real Estate Committee, have announced that they intend to schedule oversight hearings to examine how a potential acquisition would affect The Hartford’s policyholders and the general public.
“When a 211-year-old Connecticut insurer is being considered for a takeover by an overseas entity, it’s our job as legislators to get to the bottom of how this affects consumers and our local job market,” Wood said in
a statement. “I look forward to a fully transparent process that includes a hearing in front of our Insurance and Real Estate Committee in the upcoming weeks.”
Republican leaders in the state legislature faulted Democrats for the company’s predicament.
“What’s alarming is to see our flagship industry exposed to a hostile corporate raid which puts goodpaying Connecticut jobs at risk,” said state Sen. Kevin Kelly, R-Stratford, the Senate Republican leader. “I want to see Connecticut companies stay in Connecticut, grow jobs in Connecticut and support families in Connecticut. Sadly, Democratic policies make that harder and harder every year.”
Capital City institution
Founded in 1810, The Hartford specializes in property and casualty insurance, group benefits and mutual funds. Its customers include more than 1 million small businesses.
The company employs approximately 18,500, including about 6,100 in Connecticut. It sells products primarily through a network of independent agents and brokers.
It is a cornerstone of the economy of Hartford, whose concentration of insurance firms is recognized in its longstanding nickname, “insurance capital of the world.” The company’s main offices are located at One Hartford Plaza, a few blocks west of the downtown and near Union Station.
The Hartford has been providing $3.3 million annually as part of a pledge made in 2017 with two other insurance giants, Aetna and Travelers, to give the city of Hartford a combined $50 million across a five-year span for community institutions such as the Hartford Public Library.
Messages left for a spokesperson for Hartford Mayor Luke Bronin were not returned.
Elsewhere in Connecticut, The Hartford has offices in Stamford, Windsor and Farmington.
In lieu of state income tax, insurance companies such as The Hartford pay taxes based on the premiums that they collect in the state. For 2020, The Hartford paid about $30 million to the state and local governments through a number of taxes, fees and assessments, according to company data.
As the No. 160 company on last year’s Fortune list, The Hartford produced revenues of approximately $20.5 billion in 2020, down 1 percent from 2019. It posted about $1.7 billion in profits last year, compared with $2.1 billion in 2019.
“We have been through one of the most turbulent years in recent history, which was shaped by the COVID-19 pandemic, the economic shutdown, social unrest and a significant number of catastrophe events,” The Hartford’s CEO and Chairman, Christopher Swift, said in a statement in February when the firm’s latest earnings report was released. “Despite these challenges we delivered strong (pre-income tax) core earnings of $2.1 billion.”