Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, November 30, 1995 TAG: 9511300063
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: Associated Press
DATELINE: HARTFORD, CONN. LENGTH: Medium
The move will allow Aetna, a huge multi-line insurance company, to concentrate on health care and financial services, while Travelers' will strengthen its hold on the property-casualty end of the business.
There was no immediate information on whether the deal would affect the Travelers Roanoke operation. The company has a property and casualty claims department on Electric Road that employes 12 people. They investigate and settle claims.
Aetna has no employees in Roanoke. It serves the region from its Richmond offices. Both companies sell their policies through independent agents.
The deal, announced Wednesday, is one of the largest mergers in the insurance business and continues a trend of consolidation in the industry.
Competition, which has driven down premiums, and high-priced pollution claims have soured the business in recent years, forcing some insurers to abandon property-casualty lines. Companies that used to be all-purpose insurers, providing both health and property coverage, are seeking to specialize in just one of the two businesses.
Earlier this year, CNA Financial Corp. said it would acquire Continental Cos. in a $1.1 billion deal, and Kemper Corp. agreed to be acquired by Switzerland's Zurich Insurance Group for $2 billion.
``Insurers have had to take a hard look at the underlying costs of being in this business,'' said Steven Dryer, an insurance analyst at Standard & Poors, a New York-based ratings agency.
Travelers will form a new holding company, based in Hartford, to operate the combined operations.
Up to 3,300 jobs at the new entity will be eliminated, with half the cuts in Hartford, Travelers said. The consolidation is expected to save about $300 million over two years.
The new Travelers entity will have premiums of $10 billion and will rank fourth in overall domestic property-casualty lines. The top three companies are State Farm, Allstate and CNA/Continental. The new company will be No.3 in business insurance behind AIG and CNA/Continental.
The divestment will leave Aetna with three core businesses: Aetna Health Plans, Aetna Retirement Services and Aetna International, which sells insurance and financial planning services in 10 countries.
Aetna's shares fell $3.871/2 to $72 Wednesday on the New York Stock Exchange. Travelers rose $3.75 to $58.871/2.
Aetna's property-casualty business, which includes personal and commercial insurance, accounted for $5.3 billion of Aetna's total revenues of $17.5 billion in 1994. But it accounted for only $60 million of Aetna's $510 million in operating earnings.
Staff writer Mag Poff contributed to this story.
by CNB