Item 1.01
|
Entry into a Material Definitive Agreement.
|
Overview
On October 22, 2017, Aetna Inc. (“
Aetna
”)
and Hartford Life and Accident Insurance Company, a Connecticut insurance company (“
Purchaser
”) and an indirect
wholly owned subsidiary of The Hartford Financial Services Group, Inc., entered into a Master Transaction Agreement (the “
Transaction
Agreement
”) pursuant to which Aetna will sell its domestic group life insurance, group disability insurance and absence
management businesses (collectively, the “
Business
”) to Purchaser for cash consideration of $1.45 billion (the
“
Transaction
”). As part of the Transaction, among other things, (a) Aetna Life Insurance Company, a Connecticut
insurance company and wholly owned subsidiary of Aetna (“
ALIC
”), will cede to Purchaser, and Purchaser will
reinsure, on a 100% coinsurance basis, policy liabilities related to the Business pursuant to a reinsurance agreement between
Purchaser and ALIC to be entered into on the closing date, (b) Purchaser will purchase from Aetna and its affiliates assets and
assume liabilities and assigned contracts related to the Business, and (c) assets related to and supporting the life and disability
insurance policies will be transferred to a trust established by Purchaser for ALIC’s benefit.
Representations, Warranties and Covenants
The Transaction Agreement and the agreements
to be entered into in connection therewith contain customary representations, warranties and covenants, including, among others,
covenants by Aetna to, subject to certain exceptions, conduct its business in the ordinary course during the interim period between
the execution of the Transaction Agreement and the closing. Subject to certain exceptions, Aetna has agreed not to compete with
the Business for 42 months after closing and not to solicit or employ any transferred employees or certain key employees of Purchaser
for two years after closing, and Purchaser has agreed not to solicit or employ certain Aetna sales representatives for 24 months
after closing.
Closing Conditions
The obligation of the parties to consummate
the Transaction is subject to customary closing conditions, including, among others, (1) the absence of legal impediments in the
United States or any of its territories to the consummation of the Transaction, (2) compliance by Purchaser and Aetna in all material
respects with their respective obligations under the Transaction Agreement and (3) subject in most cases to exceptions that do
not rise to the level of a “Material Adverse Effect” or “Purchaser Material Adverse Effect” (each as defined
in the Transaction Agreement), as applicable, the accuracy of representations and warranties made by Purchaser and Aetna, respectively.
In addition, Aetna’s obligation to consummate the Transaction is subject to there not having occurred any of the following
events (each, a “
Triggering Event
”): (1) Purchaser fails to maintain a risk based capital ratio of at least
225%; (2) Purchaser fails to maintain its license in Connecticut to provide ALIC with statutory reserve credit for the reinsurance;
or (3) Purchaser is placed into rehabilitation, liquidation or other delinquency proceeding.
Indemnity
Pursuant to the Transaction Agreement,
each of Aetna and Purchaser will indemnify the other party for breaches of their respective representations, warranties and covenants,
as well as additional indemnities, in the case of Aetna, in favor of Purchaser for excluded liabilities and taxes, and, in the
case of Purchaser, in favor of Aetna, for assumed liabilities and the operation of the Business after closing. The indemnification
obligations are subject to customary limitations.
Termination
Each party may terminate the Transaction
Agreement under certain circumstances, including, among other things, (1) if the Transaction has not been consummated by February
1, 2018 (subject to Aetna’s right to extend the end date to not later than March 31, 2018 if not all governmental consents
have been obtained) or (2) due to the other party’s breach in any material respect of the provisions of the Transaction Agreement
that would cause a failure of any of the conditions to closing described above. Aetna may terminate the Transaction Agreement if
all other conditions to closing have been satisfied or waived and a Triggering Event exists.
Description of Transaction Agreement Not
Complete
The foregoing description of the Transaction
Agreement does not purport to be complete, and is qualified in its entirety by reference to the full text of the Transaction Agreement,
which is attached hereto as Exhibit 2.1 and is incorporated herein by reference.