WORCESTER, Mass., Dec. 30 /PRNewswire-FirstCall/ -- The Hanover Insurance
Group, Inc. (NYSE: THG) announced that it has closed the previously announced
sale of its run-off variable life insurance and variable annuity business to
The Goldman Sachs Group, Inc. today. In conjunction with this closing, The
Hanover also has received approval from the Massachusetts Division of
Insurance for a dividend of $40 million from its retained life business, First
Allmerica Financial Life Insurance Company (FAFLIC).
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"I am pleased we have closed the previously announced life transaction,
monetizing the value of our life business and enabling us to focus on our
property and casualty business," said Frederick H. Eppinger, president and
chief executive officer of The Hanover Insurance Group, Inc. "The sale
provides us with greater financial flexibility and funding for our share
repurchase program."
Total proceeds are expected to be approximately $347 million, based on an
estimated purchase price calculated as of November 30, 2005. Total proceeds
include the $40 million dividend from FAFLIC and $17 million additional cash
available from certain non-insurance subsidiaries. Also included is $26
million of expected proceeds from the related Allmerica Investment Trust (AIT)
fund reorganization and sale of the AIT funds' investment advisory company,
which is scheduled to close on or about January 6, 2006. Approximately $34
million of the total proceeds will be paid to The Hanover over a three-year
period beginning in 2006.
The final purchase price will be determined as of the December 30, 2005
closing; accordingly, the total expected proceeds of approximately $347
million will be modified to reflect adjustments as of that date. The impact of
this final adjustment is not expected to be material.
The transaction is expected to result in a net after-tax loss on the sale
that is projected to be approximately $457 million in 2005, primarily as the
result of the write-down of non-cash deferred acquisition cost assets. The
after-tax net loss will also be modified to reflect the December 30, 2005
closing adjustments.
Additionally, as previously disclosed, the transaction will also result in
a net after tax loss that is projected to be $16 million in 2006, related to
transition services expenses and severance costs.
As previously announced, the company's Board of Directors has authorized a
share repurchase program of up to $200 million funded from the proceeds of the
transaction. This program is currently expected to be substantially completed
in the first half of 2006.
Forward-Looking Statements
Certain statements in this release, including statements estimating the
total proceeds, the expected closing date for the AIT fund reorganization, the
expected losses and the expected completion date for the share repurchase
program, are forward-looking statements, as that term is defined in the
Private Securities Litigation Reform Act of 1995. There are certain factors
that could cause actual results, to differ materially from those anticipated
by this press release. These include: (1) the successful and timely
consummation of the AIT fund reorganization and the sale of the AIT funds'
investment advisory company, (2) the uncertainties as to the gross proceeds to
be received by THG, including the uncertainty as to the effects of the various
purchase price adjustments, (3) the uncertainties of the successful and timely
execution of the repurchase program and the continuation thereof in the event
of unanticipated events, market conditions or other opportunities or needs for
the deployment of capital (4) the uncertainties of the purchase price hedge
to effectively hedge the purchase price as currently estimated and at a cost
consistent with expectations; (5) the impact of policyholder surrenders on the
purchase price adjustment, which are not hedged; (6) the impact of contingent
liabilities, including litigation and regulatory matters, assumed by the
holding company in connection with the transaction; and (7) the statutory
results of operations of the Life Companies segment until close, which will
impact the statutory surplus of AFLIAC and consequently the ultimate purchase
price, (8) the ability to realize post-closing earnings for the property-
casualty segment that are taxable and make FAFLIC's tax attributes valuable;
(9) the ability to timely achieve overhead and other expense savings; (10) the
ability of THG and FAFLIC to perform the transitional services in connection
with the transactions without incurring unexpected expenses and the completion
of the transitional services within the projected time so that the company can
realize projected cost savings; and (11) the ability to outsource the
administration of the retained FAFLIC businesses at projected rates.
Forward-looking statements are not guarantees of future performance, and
actual results could well differ materially. Investors should consider these
and other risks and uncertainties in our business that may affect future
performance (including Life Companies operations) and that are discussed in
readily available documents, including The Hanover's (formerly Allmerica's)
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, periodic reports
on Form 8-K and other documents filed by The Hanover Insurance Group, Inc.
(formerly named "Allmerica Financial Corporation") with the Securities and
Exchange Commission and which are also available at http://www.hanover.com
under "Investors."
The Hanover Insurance Group, Inc., formerly know as Allmerica Financial
Corporation, is the holding company for a group of insurance companies
headquartered in Worcester, Massachusetts.
Contact Information
Investors: Media:
Sujata Mutalik Michael F. Buckley
E-mail: smutalik@hanover.com E-mail: mibuckley@hanover.com
1-508-855-3457 1-508-855-3099
SOURCE The Hanover Insurance Group, Inc.
-0- 12/30/2005
/CONTACT: Investors: Sujata Mutalik, +1-508-855-3457,
smutalik@hanover.com, or Media: Michael F. Buckley, +1-508-855-3099,
mibuckley@hanover.com, both of The Hanover Insurance Group, Inc./
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AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com/
/Website: http://www.hanover.com/
(THG)
CO: The Hanover Insurance Group, Inc.; The Goldman Sachs Group, Inc.; First
Allmerica Financial Life Insurance Company
ST: Massachusetts
IN: INS FIN
SU:
AH-EO
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