The acquisition of renewal rights to student health and special risk business written by the group led by National Guardian Life Insurance Co. Inc. stands to provide additional momentum to Berkshire Hathaway Inc.'s burgeoning presence in an accident and health niche.
National Guardian Life and its Commercial Travelers Life Insurance Co. affiliate generated $84.6 million in earned premiums in the group student health business in 2018, according to disclosures on the Accident and Health Policy Experience Exhibits of their annual statements. The Wellfleet Insurance Co. and Wellfleet New York Insurance Co. subsidiaries of Berkshire, meanwhile, produced $139.1 million in earned premiums from that business line, up from only $49 million in 2017.
Wellfleet will immediately take responsibility for policy administration. The transaction is otherwise subject to certain conditions and is expected to close by the end of the third quarter.
The companies said that the collegiate accident and health component of National Guardian Life's business provides coverage to more than 26,000 students on approximately 100 U.S. campuses. National Guardian Life and Commercial Travelers Life also offer K-12 student insurance and special risk policies that provide accident insurance for various organizations and group-sponsored activities such as youth sports, summer camps and special events. A Wellfleet spokeswoman confirmed that those aspects of the business are also included in the transaction.
All told, the combination of National Guardian Life and Commercial Travelers Life had 35,751 covered lives in their group student health business at year-end 2018. Covered lives at the two Wellfleet companies in the group student health line totaled 67,758.
On a pro forma basis, using data reported on the Accident and Health Policy Experience Exhibits and assuming the renewal of the National Guardian Life and Commercial Travelers Life books of business, Wellfleet would rank as the No. 3 writer of group student health business based on 2018 premiums earned and No. 4 based on covered lives.
It would trail UnitedHealth Group Inc.'s UnitedHealthcare Insurance Co. and CVS Health Corp.'s Aetna Life Insurance Co. relative to earned premiums and Pupil Benefits Plan Inc., UnitedHealthcare and, most likely, Aetna Life relative to covered lives. Aetna Life reported 349,072 covered lives in the student health business on the Supplemental Health Care Exhibit of its annual statement, but left the relevant field in the Accident and Health Policy Experience Exhibit blank.
The Wellfleet companies on a stand-alone basis also ranked behind the Health Care Service Corp. a Mutual Legal Reserve Co. group based on earned premiums; they lagged Unified Life Insurance Co. on the basis of covered lives.
The expansion has been in the works for several years, dating back to the 2011 acquisition of a student health plan third-party administrator. Wellfleet New York, then operating as Atlanta International Insurance Co., began reporting group accident and health premium writings in the third quarter of 2017. Wellfleet Insurance, then operating as Commercial Casualty Insurance Co., started showing group accident and health premium volume in the third quarter of 2018. The parties announced their rebranding under the Wellfleet name in November 2018.
The Wellfleet companies' group accident and health business in 2018 was limited to the student health line. But National Guardian Life and its affiliate produced business in a number of other categories, including the limited benefit line and dental as part of their combined $377.3 million in group accident and health earned premiums. In the group accident-only business, their earned premiums totaled $19.1 million. National Guardian Life reported in its annual statement that it or its affiliates also provide vision coverage in their group markets business, as well as the student health and dental coverage.
The group's largest product is preneed insurance, which is life insurance used to fund prearranged funeral contracts. It has also developed single-premium life and single-premium immediate annuity products that are marketed to senior citizens to assist in estate planning.
National Guardian Life said the divestiture would allow it to focus on other lines of business. It cited a similar rationale in 2018 when Settlers Life Insurance Co., another group member, discontinued the sale of final expense insurance products.
"While the market is large and important," CEO Emeritus Mark Solverud said in reference to the final expense business in National Guardian Life's 2018 annual report, "there are many companies pursuing this market and margins have been driven to levels that are challenging for most companies."
