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Humana has signed a definitive agreement to sell the stock of its wholly-owned subsidiary, KMG America Corporation, to Continental General Insurance Company (CGIC), a Texas-based insurance company wholly owned by HC2 Holdings.
KMG’s subsidiary, Kanawha Insurance Company (KIC), includes Humana’s closed block of non-strategic commercial long-term care insurance policies that serves approximately 30,100 policyholders.
CGIC currently provides long-term care, life and annuity coverage to approximately 93,000 members.
The sale of the stock of KMG America Corporation will also include a capital contribution of approximately $203 million of Humana parent company capital, subject to customary adjustments, in addition to the transfer of approximately $150 million of statutory capital, the company said.
It added that the cash savings from the expected tax treatment of the sale should more than offset the capital contribution and statutory capital transferred by Humana. Excluding the loss on sale, the company does not anticipate a material impact to earnings in 2017 or 2018 from the sale of the business.
Based on the terms of the definitive agreement, Humana expects to record a net loss associated with the sale of KMG of approximately $400 million, or $2.75 per diluted common share, under generally accepted accounting principles (GAAP).
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.
The KMG transaction is anticipated to close by the third quarter of 2018 subject to customary closing conditions, including South Carolina Department of Insurance approval.
Humana, HC2 holdings, Continental general insurance company, KMG america corporation, South carolina department of insurance, M&A, Texas, US