Aflac Acquires Continental American

Jul. 30--For the first time in its 54-year history, Columbus-based supplemental insurance company Aflac has acquired another insurance company.

Aflac announced late Wednesday afternoon that it will purchase privately owned Continental American Insurance Company -- formerly Carolina Continental Insurance Company -- for $100 million. The deal is expected to be finalized at the end of the year with Aflac agents selling Continental American products by early 2010.

Columbia, S.C.-based Continental American is tiny in revenue and reach compared to Aflac, but it brings a platform that could allow Aflac, which sells in the United States and Japan, to expand its U.S. business operation, said Aflac U.S. President Paul Amos II.

"We have always through the last 54 years viewed the opportunities before us," Amos said. "We look at those opportunities through a tiered system. This one made it through all the tiers."

The reason?

"It doesn't take us out of the core business we are in," Amos said. "Most other insurance companies are in other areas, they sell annuities and financial products. This is the perfect fit."

Similar approaches

Continental American and Aflac have similar business approaches. Both companies sell their products to customers through the policyholder's employer, but they do it in a different manner.

Aflac sells payroll deduction policies directly to the employee. Continental American sells group policies to the employers, who then offer the insurance to their employees at a cost.

Aflac relies on one of the largest field forces in the country -- about 75,000 agents -- while Continental American has a limited sales force, just six agents, but heavily relies on a network of more than 4,000 insurance brokers.

"The platform that is best suited for the majority of American businesses is selling to the individual, which is what we do," Amos said. "But some large businesses as well as part of the insurance brokerage community are increasingly demanding a group platform. Now, I did not say all of them, but more and more are."

Steven Schwartz, a life insurance analyst for Raymond James & Associates based in Chicago, called the deal "interesting," saying it opens up the broker market to Aflac. Brokers are insurance consultants who also sell products and who represent the buyer and not the seller, Schwartz said.

"The idea here is they want to attack the broker market," Schwartz said. "Aflac sells entirely through agents. The broker market needs a good group insurance product. Aflac obviously thought it was cheaper to buy the capability to write a group product than to develop it."

'Standalone company'

There is a vast difference in the size of the two companies. Aflac has more than 8,000 employees worldwide, while Continental American has 163. The merger should not have an immediate impact on jobs at either company, Amos said.

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