The Hartford Financial Services Group, Inc, announced that it will buy the US Group life and disability business from the health insurance company Aetna, Inc for $1.45 billion in cash. Hartford hopes to expand its insurance division and ignite its digital technology strategy.
Hartford shares lost over 5%, falling to $53.63 after they said is would halt their existing buyback in order to pay for part of the deal with Aetna. They added that they will not be repurchasing stock next year as well.
The company said it will use $273 million from its 2017 equity buyback program to fund the deal, and will also use dividends from its holding company resources and insurance units to cover the cost of Aetna’s subsids.
“Hartford is financing the deal by dividends and clearly mentioned that it will not authorize an equity repurchase plan for 2018, driving the shares down,” said John Heagerty, Atlantic Equities analyst.
The deal will insure that Harford is the second-biggest group life and disability insurance provider in the US. They will have over 20 million customers, and the deal will also strengthen the firm’s dealings with mid-sized companies.
Aetna’s divisions will also provide Hartford with access to Aetna’s digital assets. These tools will allow Hartford to more efficiently process worker’s comp and disability claims. Aetna’s assets include an integrated absence management platform.