UFG sells United Life for $280M

UFG’s headquarters in Cedar Rapids, shown in an undated photo. CREDIT CBJ


By Dave DeWitte

Spending $280 million to acquire the life insurance business of Cedar Rapids-based United Fire Group is part of a Chicago startup’s ambitious growth plans.

United Fire Group (UFG) and Kuvare US Holdings announced on Sept. 19 that Kuvare US will buy United Life Insurance Company next year for $280 million. UFG, which started the life insurance business in 1955, will sharpen its focus on its core property and casualty busi­ness, using the big capital infusion for share repurchases, shareholder dividends and potentially acquisitions.

Spurring Kuvare US’ interest in the deal is a vast opportunity to deliver more an­nuity and complex life insurance products to retiring baby boomers and other mid­dle-market consumers, CEO Dhiren Jhaveri told the CBJ after the announcement.

“What we like about United Life is that it enables us to deliver solutions through­out our customer’s life cycle,” Mr. Jhaveri said. “Particularly when you’re younger and just starting a family, you tend to look at protective products like the fantastic life insurance products United Life offers. As you get older, you look at more accumula­tion-oriented products, like annuities and more sophisticated life insurance policies.”

Kuvare US offers the latter kinds of prod­ucts through Guaranty Income Life Insur­ance Co. in Baton Rouge, Louisiana, which it acquired six months ago.

As baby boomers stop earning a steady paycheck at retirement, Kuvare US sees opportunities to sell them annuities that can provide a stream of predictable in­come from their retirement savings. Be­yond that, Kuvare US sees opportunities to sell them insurance products that will provide tax and convenience benefits for transferring wealth.

The acquisition will bring “great cross-pollination from a product stand­point,” Mr. Jhaveri said, along with distri­bution synergies. United Life is sold exclu­sively through a network of independent insurance agents and brokers, while Guar­anty Income Life is sold through commu­nity banks and independent marketing agencies. Kuvare US ownership will allow both insurance companies’ sales channels to sell all of its products.

Carlos Sierra, chief operating officer of Kuvare US, will be a key architect of the in­tegration of Guaranty Income Life, United Life and a third Kuvare company, Kuvare Life Re, based in Bermuda. Although the United Life acquisition isn’t expected to close until the first half of 2018, Mr. Sierra said the work is already beginning on how best to tap the synergies of the companies.

About 46 employees of United Life, most of them working in Cedar Rapids, will be offered employment with Kuvare US with no change in positions or sal­aries. Kuvare US will sign a short-term lease agreement with UFG to enable them to remain in Cedar Rapids for a time, after which Mr. Jhaveri and Mr. Sierra said the company is committed to keeping a Cedar Rapids metro area presence.

The 46 employees represent a small percentage of United Life’s 1,000-plus em­ployees nationwide, of which more than 600 are in Cedar Rapids.

Mr. Jhaveri said he’d been studying United Life over the past two years, be­coming an admirer of its products and in­dependent agent network. His interest in acquiring United Life aligned with UFG’s organizational plans, he said, and they worked through their respective advisors to develop a deal.

The purchase works out to a roughly 20 percent premium over United Life’s book value, and will be paid in cash. The terms restrict UFG from reentering the life insurance business or soliciting any of its United Life employees for employ­ment for two years after it is concluded, according to an SEC filing.

UFG President and CEO Randy Ramlo said in a press release that the deal “estab­lishes a solid future for our life insurance employees, insurance agents and custom­ers, while allowing us to continue to build on the success of our property and casualty operations.” He said UFG plans to reinvest in its property and casualty business and surety operations, with initiatives such as a new technology platform to enhance un­derwriting decisions and productivity.

The deal comes as UFG expands its downtown Cedar Rapids campus, a proj­ect including the construction of a new tower next to the American Building on First Avenue SE, and copes with a wave of property insurance claims resulting from hurricanes Harvey and Katrina.

Mr. Jhaveri said the growth strategy of Kumare US calls for both organic growth and more acquisitions that will add to its scale, but the company has no plans at present to go public.

UFG shares rose on the deal, gaining nearly 3.5 percent before giving up some of the gains over the next two days.