Business Moves
State Fund Withdraws Plans for Home Office Expansion
California’s State Compensation Insurance Fund has announced it has decided to not move forward with the plans for the construction of a new office building adjacent to its headquarters at 1275 Market Street in San Francisco.
When the new building was planned, State Fund was experiencing unprecedented growth due to the most dramatic marketplace contraction in the 91-year history of California’s workers’ compensation system. Many insurance carriers withdrew from the market while others became insolvent. As a result, thousands of employers turned to State Fund to obtain mandatory workers’ comp coverage.
Recent workers’ comp reform legislation, particularly SB 899 signed by Governor Schwarzenegger in 2004, has resulted in many carriers returning to California. These positive market developments have eliminated the need to increase staff in State Fund’s home office in San Francisco.
In response to these changes, State Fund’s board of directors decided that the construction of a new building in San Francisco for State Fund’s use should not proceed. The board also cited increased construction and steel costs as factors.
“This move reflects our commitment to make decisions that serve the best interests of the organization, our policyholders and their injured workers, and the California economy,” said State Fund Board Chair Jeanne Cain. “The fact that the new building is no longer needed in San Francisco underscores that one of the central goals of last year’s reform legislation-reducing costs and bringing carriers back into the California market-has been successful.”
The decision not to move forward with the construction of a new building is one of several board supported management measures that have contributed to reduced costs for California employers. State Fund recently announced a 14 percent average rate reduction. With this filing, State Fund has reduced average rates a cumulative 26.2 percent since January 2004.
MetLife Completes Acquisition of Travelers Life
MetLife announced it has completed the acquisition of Citigroup’s Travelers Life & Annuity and substantially all of Citigroup’s international insurance businesses for $11.8 billion. Under the terms of the agreement, Citigroup received approximately $1 billion in MetLife common stock and $10.8 billion in cash, subject to post-closing adjustment. The sale will result in a third quarter gain of approximately $2 billion after tax for Citigroup.
“This transaction significantly increases our size and scale in our core insurance and annuity products and expands our presence in the retirement and savings and international markets,” said Robert H. Benmosche, chairman and CEO of MetLife. “The distribution agreements with Citigroup, complementing our existing channels, provide us with one of the broadest distribution networks in the industry.”
As part of the transaction, MetLife products will be available through certain Citigroup distribution channels, including Smith Barney, Citibank branches, and Primerica in the U.S., as well as a number of international businesses, under 10-year agreements.
MetLife also announced that, in a transaction related to the acquisition of Citigroup insurance businesses, it signed an agreement with Citigroup to acquire CitiStreet Associates, which is primarily involved in the distribution of 403(b) and 457 annuity products to the healthcare, education and not-for-profit markets. This transaction is expected to close on Sept. 1, 2005. CitiStreet LLC is a joint venture owned equally by affiliates of Citigroup and State Street Corporation. CitiStreet LLC is not being acquired by MetLife.