The Hartford Insurance Group, Inc. · NYSE:HIG
The Hartford Insurance — The Hartford Financial Services Group — Merger or Acquisition (August 2018)
31 slides from The Hartford Insurance's merger presentation, Aug 22, 2018
Slide 1: The Hartford to Acquire Navigators
The Hartford Financial Services Group, Inc. August 22, 2018 The Hartford to Acquire Navigators: Broadens and Deepens Commercial Lines Product Offerings and Underwriting Risk Appetite Copyright © 2018 by The Hartford. All rights reserved. No part of this document may be reproduced, published or poste
Slide 2: Disclaimers
Disclaimers Forward Looking Statements Certain statements made in this presentation should be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These include statements about The Hartford’s future results of operations and projections regarding
Slide 3: Transaction summary
Transaction summary • The Hartford to acquire Navigators (NASDAQ: NAVG) in an all-cash transaction for $2.1 billion, or Purchase $70.00 per share, based on current shares outstanding price • The Hartford to assume $265 million of Navigators' senior notes • Implied purchase price value: - 1.7x book v
Slide 4: Overview of Navigators
Overview of Navigators Copyright © 2018 by The Hartford. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford. 4
Slide 5: Navigators: A global specialty organization with $1.7 billion in 2017 gross written premiums
Navigators: A global specialty organization with $1.7 billion in 2017 gross written premiums and strong underwriting track record Overview Well-Balanced, Global Portfolio of $1.7 Billion GWP1 International • Global specialty focus with highly regarded team underwriting in Marine U.S. Marine 22 indus
Slide 6: Navigators has three reporting segments, led by U.S. Insurance
Navigators has three reporting segments, led by U.S. Insurance with ~60% of 2017 gross written premiums U.S. Insurance International Insurance Global Reinsurance $988 million (58%) $501 million (29%) $224 million (13%) 2017 GWP 2017 GWP 2017 GWP E&O Latin America International 6% D&O NavTech1 and U.
Slide 7: Navigators has a strong underwriting track record
Navigators has a strong underwriting track record, with underlying underwriting profits and favorable prior accident year development (PYD) over the last 10 years Quarterly Combined Ratio/Underlying Combined Ratio (2008-2017) Underwriting Loss 100% Underwriting Gain 1Q09 4Q11 3Q16 1Q08 2Q08 3Q08 4Q0
Slide 8: Transaction Benefits
Transaction Benefits Copyright © 2018 by The Hartford. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford. 8
Slide 9: The acquisition achieves key strategic and financial objectives for Commercial Lines
The acquisition of Navigators achieves key strategic and financial objectives for The Hartford’s Commercial Lines segment • Highly complementary to current Commercial Lines competencies with added specialty and Broaden and Enhances excess and surplus lines capabilities deepen product Commercial Line
Slide 10: Enhances Commercial Lines market presence to #7 in the U.S.
Enhances Commercial Lines market presence to #7 in the U.S. • Acquisition brings together two underwriting-centric The Hartford Commercial Lines organizations with a commitment to innovation, financial Net Written Premiums, Pro Forma 2017 performance and talent development ($ in billions) – Strength
Slide 11: Increases Commercial Lines to ~50% of pro forma consolidated premiums
Increases Commercial Lines to ~50% of pro forma consolidated premiums The Hartford 2017 Pro Forma Net Written Premiums1 $17.0 Billion ($ in billions) Commercial Lines Personal Lines Group Benefits $8.2 (48%) $3.6 (21%) $5.2** (31%) Small Middle Specialty Group Group Navigators Auto Homeowners Commer
Slide 12: Broadens and deepens Commercial Lines product offerings
Broadens and deepens Commercial Lines product offerings, reducing concentration in workers’ compensation and expanding casualty, professional liability and marine The Hartford1 Navigators Pro Forma Global Bond Reinsurance Marine Bond Bond 3% 3% Property Property Workers Professional 3% 3% Auto 1% 4%
Slide 13: Expands geographic underwriting reach
Expands geographic underwriting reach to support industry verticals and The Hartford’s U.S. customers’ risk management needs • Provides access to the world’s largest specialty market through an established Lloyd’s presence – Managing agency of Syndicate 1221, founded in 1980 as a marine specialist a
Slide 14: Adds proven and tenured team with customer-centric approach
Adds proven and tenured team with customer-centric approach and similar culture to The Hartford • Founded in 1974 as a marine managing agency, listed on the NASDAQ since June 1986, Navigators has a long-standing Navigators presence in specialty lines, with deep expertise in certain lines and industr
Slide 15: Financial Impacts
Financial Impacts Copyright © 2018 by The Hartford. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford. 15
Slide 16: Financially accretive, driven by premium growth with modest expense synergies
Financially accretive, driven principally by higher premium growth with modest expense synergies • Sufficient existing resources to fund all cash purchase price of $2.1 billion, but will consider financing alternatives; The Hartford does not intend to issue common equity in connection with the trans
Slide 17: Modest impact to leverage ratios expected at closing
Modest impact to leverage ratios expected at closing Pro Forma1 As reported as of June 30, 2018 ($ in millions) June 30, 2018 Leverage ratio Total debt $4,675 $4,939 Stockholders' equity 12,546 12,5262 AOCI (1,353) (1,353) Total capital $17,221 $17,465 Total debt/capital, excluding AOCI 25.2% 26.3%
Slide 18: Acquisition accelerates key strategic and financial goals
Acquisition accelerates key strategic and financial goals Acquisition helps advance key strategic goals in our Commercial Lines business, including broader product offerings and underwriting risk appetite Combines two organizations with disciplined underwriting cultures and a shared commitment to in
Slide 19: Navigators Financial Summary
Navigators Financial Summary Copyright © 2018 by The Hartford. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford. 19
Slide 20: Navigators profile
Navigators profile Business Description 2017 Business Mix • Navigators is a global specialty underwriter with three reporting segments: U.S. Insurance, International By Segment and Line of Business Insurance and Global Reinsurance • The U.S. Insurance and International Insurance International segmen
Slide 21: Summary of U.S. Insurance segment
Summary of U.S. Insurance segment Business Description U.S. Insurance Business Mix Professional • U.S. Insurance is composed of three business lines: Marine Liability P&C, Marine, and Professional Liability 16% 12% • P&C is 72% of 2017 U.S. Insurance GWP and is primarily construction liability • Mar
Slide 22: Summary of International Insurance segment
Summary of International Insurance segment Business Description International Insurance Business Mix • International Insurance is composed of three International business lines: Marine, P&C, and Professional International Professional Liability Marine Liability 39% 29% • Marine is the largest busine
Slide 23: Summary of Global Reinsurance segment
Summary of Global Reinsurance segment Business Description Global Reinsurance Business Mix • Global Reinsurance underwrites specialty products in Latin America and U.S. International Property regions where treaty reinsurance is a more efficient Property 25% 13% means of participating in the local ma
Slide 24: Navigators financial highlights
Navigators financial highlights Financials 5 Year 2013 2014 2015 2016 2017 1H181 ($ in millions, except per share amounts) CAGR Gross written premiums $ 1,371 $ 1,432 $ 1,454 $ 1,569 $ 1,713 5.7% $ 992 Net written premiums 888 1,000 1,044 1,186 1,271 9.4% 773 Net investment income 56 64 69 79 89 12.
Slide 25: Appendix – Discussion and reconciliation of GAAP to non-GAAP financial measures
Appendix – Discussion and reconciliation of GAAP to non-GAAP financial measures Copyright © 2018 by The Hartford. All rights reserved. No part of this document may be reproduced, published or posted without the permission of The Hartford.
Slide 26: Discussion of non-GAAP financial measures – The Hartford
Discussion of non-GAAP financial measures – The Hartford The Hartford’s non-GAAP financial measures The Hartford uses non-GAAP financial measures in this presentation to assist investors in analyzing the projected impact of the transaction described herein on the company’s operating performance for
Slide 27: Discussion of non-GAAP financial measures – The Hartford - continued
Discussion of non-GAAP financial measures – The Hartford - continued Core Earnings ROE (Core Earnings Return on Equity): The Hartford provides different measures of the return on stockholders' equity. Net income ROE is calculated by dividing (a) net income for the prior four fiscal quarters by (b) a
Slide 28: Discussion of non-GAAP financial measures – Navigators
Discussion of non-GAAP financial measures – Navigators Navigators' non-GAAP financial measures In order to assist investors in analyzing the projected impact of the transaction, this presentation includes financial measures of Navigators that have been adjusted to be consistent with The Hartford’s n
Slide 29: Discussion of non-GAAP financial measures – Navigators – continued
Discussion of non-GAAP financial measures – Navigators – continued Core Earnings ROE (Core Earnings Return on Equity): We are providing Navigators' core earnings ROE (as defined in the discussion of The Hartford’s non-GAAP financial measures) based on Navigators' financial statements as reported in
Slide 30: Discussion of non-GAAP financial measures – Navigators - continued
Discussion of non-GAAP financial measures – Navigators - continued Underlying combined ratio: We are providing Navigators' underlying combined ratio (as defined in the discussion of The Hartford’s non-GAAP financial measures) based on Navigators' financial statements as reported in its SEC filings.
Slide 31: Discussion of non-GAAP financial measures – Navigators - continued
Discussion of non-GAAP financial measures – Navigators - continued Twelve Months Ended Twelve Months Ended Consolidated Consolidated 2008 1Q08 2Q08 3Q08 4Q08 1Q13 2Q13 3Q13 4Q13 2013 Combined ratio 89.2% 90.4% 107.9% 88.9% Combined ratio 97.9% 97.7% 89.8% 94.0% Less: Impact of catastrophes 0.0% 0.0%
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